When you’re getting ready to buy a house, you’re likely going to be shopping for a mortgage. When you’re looking for a lender, you’ve normally got two options – a loan from a mortgage broker, or a loan from a bank. Each of these options has its distinct advantages, as long as you know the differences between them.
In this article, we’re going to be covering the differences between a mortgage broker and a bank, and which one may be better for you to use. Keep reading to find out more!
Understanding the Two Types of Mortgage Lenders
When it comes to mortgage loans, there are two types of lenders available on the market. As you may have guessed, these two lenders are mortgage brokers and banks.
A mortgage broker is a middleman, so to speak. Rather than providing funds to you directly, they’re going to help you find the best lender for your needs. They work with a number of mortgage companies, meaning that they’ll be able to find just about any lender for you, regardless of what you’re looking for. Often, you’ll find that a mortgage broker service is the best option available since they’ll be able to provide many different quotes rather than one or two.
Banks, also known as direct lenders, are the origin of a mortgage. They’ll process and fund the loans themselves. They are the company that is going to lend you the money from their pockets directly. Many large financial institutions are mortgage lenders, like major banks and credit card companies.
How Do Mortgage Brokers Work?
Mortgage brokers are companies that specialize in finding mortgage loans for their clients. They’re well versed in all things related to mortgages, and they do what they can to find you the best loans available based on your needs. They work with a number of different lenders, including banks, credit unions, and private mortgage companies. This allows you to choose from a number of different options when you’re shopping for a home loan.
The Mortgage Broker Process
When you work with a mortgage broker, you’re going through some of the same steps that you would take with a bank. You’re still going to apply for a loan and provide a bit of financial information so that they can better serve you.
After applying, the broker that you’re working with will present you with a number of options that you’re qualified for. These are going to come with different loan amounts, interest rates, and different terms. Then, you’ll be able to pick the one that works best for you.
The Advantages of Working with a Mortgage Broker
When you work with a mortgage broker rather than an individual bank, there are a number of advantages that you’ll enjoy.
- Mortgage brokers are going to provide options that you aren’t entirely aware of.
- Brokers can help you understand all of the working parts of a mortgage and tell you which mortgage will be best for you.
- They make the mortgage application process more convenient when shopping around, and faster overall.
How Do Mortgages from Banks Work?
Banks, or direct lenders, are the traditional way of obtaining a mortgage. This process is streamlined, as it’s been used for decades. When you decide to work with a direct lender, however, your mortgage options are limited. You’re only able to get a mortgage loan on their terms. This means that you may be missing out on the best interest rates and loan terms available from their competition.
The Bank Mortgage Process
When you work with a direct lender, the process is streamlined. This is one of the advantages of working with a bank rather than a broker. Working with a bank involves filling out an application. Then, after the application has been reviewed, you’ll meet with a loan officer. They’ll give you your options available from the bank. If these don’t work for you, however, you’re out of luck. Working with a bank can be a limiting factor when you’re shopping around for a mortgage.
The Advantages of Working with a Bank
When you work with a bank, there are still some advantages to be considered:
- Working with your bank opens up opportunities you may not have had before, like free checking accounts or competitive interest rates.
- The mortgage process is streamlined when you work with a bank, making it much easier.
- Loan officers are going to be able to advise you on what you can afford, to a certain degree.
How Do You Choose Between the Two?
Choosing between a mortgage broker and a bank really comes down to your needs. For the most part, a mortgage broker is going to provide the best options you’ll be able to find for a mortgage, though. They work with a number of different lenders, meaning that the variety of loans you’ll qualify for is going to be numerous. You’ll certainly find something you’re looking for. If they don’t, however, your bank may be able to fulfill your needs, too, and offer you some perks that wouldn’t otherwise be available through them.
Always Know Your Needs
Before working with a mortgage broker or a direct lender, it’s important to know your financial needs. Buying a house is a large responsibility. Before you make your decision, find out what you can afford by using a mortgage calculator. This will provide you with the information you need before you get started.
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