One idea that is often thrown around is that it is better to simply finance directly through a lender or bank, rather than employing the services of a mortgage broker. Thus a large majority of homeowners turn to banks when the time comes to finance a mortgage.
Banks Can Be Bureaucratic
There is a sense of familiarity working with the same organization that one banks with, you already know the banker who will be handling your mortgages. This makes them a comfortable option to work with for most people
But there are some cons as well. Typically banks will take longer, their processes are very bureaucratic, and the bankers aren't very experienced. They don’t have to disclose how much they receive in commission. So in the end, the borrower might end up paying more, as there is little incentive for them to go above and beyond for the customer.
While it can be said that there is an argument for “cutting out the middleman” to save money,
in the case of purchasing a home, or refinancing one, the reverse is often true.
Mortgage Brokers Often Get Better Rates
Mortgage brokers do a lot of the legwork, so that borrowers don’t have to, and utilize a variety of lenders, usually gaining access to wholesale rates that the general public wouldn’t have access to. In fact, many banks and lenders offer lower rates when accessed through a mortgage broker.
Since the rates are lower, you save more money.
This is because around 30% of financing is done through brokers, in order to stay competitive, and access that part of the market, they will offer these brokers wholesale rates.
Mortgage Brokers Have More Experience
Additionally, brokers are often much more experienced than their banking counterparts, needing to pass licensing exams among other things. This gives them a better knowledge of the industry in general, including various kinds of loans outside of the typical FHA or Conventional loans.
As such, many brokers will be able to offer a variety of programs that fit different needs, in comparison to the neatly packaged products that the banks sell, borrowers benefit from the knowledge and experience the broker possesses, even being able to finance trickier loans that would often be denied by banks and other lending institutions.
If you’re unsure about which way to go, whether through a Mortgage Broker or Bank, try giving each a call, and comparing not only rates, but closing costs, as well as the time it will take to close.
