In seeking a mortgage, an individual needs to decide whether to apply to a bank or to use a mortgage broker. There are advantages and disadvantages with each strategy, as well as many choices of lenders and mortgage options available. Each person brings to the table their own knowledge, experience, financial needs and personal circumstances. Doing some upfront research can help you best prepare for the process, whichever road you take.
Going it alone - applying to banks directly
Obtaining a mortgage from a bank or other lending institution has benefits and downsides. Regular customers of a bank, those individuals with several accounts, a credit card, and/or an automobile loan, might receive special consideration in terms of the rate or other financial aspects. The longer and more extensive the customer's history is with a particular financial institution, the more likely it is that they will be approved and receives a good deal.
If you don't have a good working relationship with a bank you will need to shop around. The process of comparing rates and terms can be a lengthy, demanding one. Also, you might not understand the financial jargon or might not know how to compare the various mortgage products correctly. Compared to a mortgage broker, banks might have less mortgage options available. Also, they are frequently more conservative and selective when lending.
A guide through the maze - the mortgage broker
The biggest advantage of mortgage brokers is that they know the business. A person might need to obtain a mortgage only once or twice in her life. Typically, this is all a broker does. Brokers are aware of the entire market. They follow the trends, know what mortgage products are available and are aware of which institutions might be offering special discounts. They may know of exclusive deals that are not offered on the open market. They are able to identify the most appropriate lender for the specific circumstances of a borrower. Brokers can spare a mortgage seeker the time and effort of applying at a bank that would not consider her particular situation.
Another significant benefit of the broker is that they handle the paperwork and the interaction with the institutions. This saving of time, work and stress is a big factor for many individuals who retain a mortgage broker. Because brokers develop professional and personal relationships with representatives of lenders, they can frequently reduce the processing time of an application.
The downside of using a mortgage broker
There are also disadvantages to mortgage brokers. One of the first questions to consider is who pays the broker's fee. While many mortgage brokers receive payment from the lender, others charge sizable fees to the borrower. This is especially true if there is a problematic situation involving credit issues or other problems. The reality that mortgage brokers develop relationships
with particular lenders might also work against a borrower. The broker might want to give the business to the person with whom she has a long history. Some brokers might be prone to obtain the mortgage from the financial institutions that pay the highest commissions. Mortgage brokers are not equally skilled and knowledgeable and individual brokers may not be aware of all the mortgage options available.
Weighing the pros and cons
Each person must make this important decision based on the individual situation. There is no "correct" answer for every borrower. It is essential that the individual seeking a mortgage study and compare the options. There are resources available to assist a borrower in this task. Besides consumer agencies and government offices, there are many websites that provide information on the relevant issues. Finally, one should speak with friends, family members and professionals who have been through the process.
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