Getting a Loan: Advantages of Using a Mortgage Broker vs. Your Local Bank

Getting a Loan: Advantages of Using a Mortgage Broker vs. Your Local Bank

When it is time to obtain a mortgage loan for a home purchase, it is really a good idea to take your time and assess all of your options.   Banks and mortgage brokers will offer you a variety of products and options from which to choose.  Since this is one of the biggest financial decisions you will ever face, it is important to choose wisely.

Bank Loans

Attaining a loan from a bank you already have a relationship with may seem like a logical first choice, and loyalty may have its rewards.  Since some banks offer up enticements such as a small discount or an added benefit, your bank may seem to be the best option.  If you have a savings or checking account with the bank and you have a great credit score, you will probably receive a competitive quote.   You may find this to be easier said than done.  The downside may be that without a shining financial record, you could have difficulty securing a loan at all.  With the recent housing debacle, banks have tightened up their lending requirements.   For example, an FHA loan only requires a credit score of 640, but the bank may require a better score in order to secure the loan.  Also, most banks have a limited number of products available, and your bank may not have the right product for your specifications.  Perhaps XYZ bank across the street may be waiting with the perfect loan for your buying needs, but you'll never know about it because you are only dealing with YOUR bank.

Mortgage Broker

A mortgage broker on the other hand would be able to tell you about a variety of products offered from various banks, credit unions and financial institutions.   Mortgage brokers aren't limited to dealing with just one institution, and they can search to find you the best deals and the right loans to fit your specific needs.   With multiple products from which to choose, you may have a better chance of finding the right loan with the best terms.  The broker usually offers rates comparable to those you would find at your own bank.  The broker usually gets the loan options at a wholesale price and tacks on a commission to give you a competitive retail rate.  The difference, of course, is you have more options from which to choose without having to deal with each lending institution separately.  Also, if your loan gets rejected, the mortgage broker may be able to repackage the loan and resubmit it to another one of the lenders.

When it's all said and done, no one option is right for everyone.  You should always shop around, compare apples to apples and make sure you are getting the best product for your personal situation.  Whether you decide to go with your bank or choose from the many options your mortgage broker has to offer, make sure that you are able to compare each loan side-by-side.  You should compare the amount of money that you will need upfront to close the loan, the interest rate, any points you may be required to pay, the terms of the loan, and any penalties that may be associated with the loan.   Sometimes when the excitement of purchasing a home overshadows the lending process, the mortgage often becomes an afterthought.  The reality is the thrill of the purchase will wear off, but the loan will be with you for many, many years to come.