Buying a home is often one of the most significant purchases most people will make in their lifetime. One of the critical decisions for home buyers to make is that of choosing whether to use a mortgage broker vs bank when seeking a loan.
Here is a breakdown of the difference between the two to help you decide whether to use a mortgage broker vs bank when choosing a home loan.
A mortgage broker has contacts with a wide variety of banks and lending institutions that can shop around for the best rates or terms for you. They will not finance your loan, but they will match you up with the lending institution that is the best fit for your situation.
Mortgage brokers are often recommended for new home buyers that are new to the process or for those with less than stellar credit. Mortgage brokers charge a fee for their services, however, which can often run a few thousand dollars or more so be sure you need one before using one.
If you want to check with a mortgage broker first to help with your purchase or refinance, Costco has a terrific program for both their Gold Star and Executive members that can help you to save a significant amount of money on your financing. In fact, if you are not already a Costco member, you may want to join for this benefit alone.
When you have excellent credit or bank with a credit union or other institution that already has an exceptional lending program, you may want to skip the broker and just go to a bank.
In many cases, people who work in public service fields will often have lending programs available through their work that can significantly reduce their costs. These can include the military, teachers or other government or public employees but many private companies also offer programs that provide attractive home buying rates to their employees.
When you apply directly to most banks or credit unions, they will likely be the one holding your note so that you will make payments directly to them. However, be sure to ask during the application process if they will be selling your mortgage to another company at inception.
If you opt to use your existing banking relationship for financing, they may have additional incentives related to your other accounts. For example, some will give you a free premium checking account or access to reduced fee services when they have your loan.
There is also an added payment convenience when using your bank. Often, the mortgage account will be visible on the same dashboard as your checking/savings accounts so you can make direct payments without actually mailing a check.
When it comes to choosing a mortgage broker vs bank, there is no one right option for everyone. It is essential, however, to do your homework and make sure you are working with a reputable and licensed broker or lender.
Remember that you are making a substantial financial transaction, so be sure to get plenty of references and check them thoroughly. Also, as with any other types of legal exchanges, be sure to have the terms and conditions of any contracts or documents checked carefully before signing on the dotted line.