28 Sep Lending: Broker vs. Bank
We are here to settle this debate once and for all: is working through a mortgage broker better or a bank. You are probably wondering that we will give you the same old line: “It all depends on how big of a loan you want”. Well, the truth is… the odds are in the broker’s favor because they offer you plenty of choices.
It’s as simple as that!
First, let’s take a look at what both these terms mean.
A broker is a middle man, who maintains a line of communication between the mortgage lender and the homeowner. The broker prepares your financial documents, issues pre-approval for the mortgage and prepares the loan application. The fee of the broker is paid by the lender, so you don’t have to worry about any hidden charges or commission in most of the cases.
As you have guessed, with a bank, you are working directly with the mortgage lender. The loan officer directs you through the process and you are responsible for filing all the documents. Whatever package is offered by the mortgage lender, it is presented to you by the bank, which you can either accept or reject.
Pros and Cons of Broker vs. Bank
|Access to better rates, low fees and more lenders||Closing delays|
|Flexibility for people who have a low credit rating||In some cases, a higher fees is charged|
|Have access to numerous loan programs|
|Small companies that respond to your query quicker|
|You can conduct personal meetings|
|No payment required to be made to the broker||Less flexible requirements|
|No conflict of interest regarding commission||Less mortgage options|
|If you are applying for a loan through your local bank where you have an account, there’s hope that you might get it earlier||The loan officers sitting in the bank might be inexperienced and not have knowledge about the process|
|No middle man||You can only hope for lower rates|
|No delays in the process because everything is pretty straightforward|
As you can see, the cons of bank clearly outweigh those of a broker. This means that you are better off using the middle man because they offer flexibility. In their case, everything is handled by the broker, so you get a sense of relief that all the documents are being filed properly.