The Perfect Mortgage–Shopping At A Bank or Brokerage
There is no simple answer to the question of whether mortgage brokers or banks offer the best chance to find the ideal mortgage. This is because there are many different mortgage products available and each borrowers financial situation is unique. Further, the products available are subject to constant change and revision, so just because one lender seemed desirable six months ago does not mean it still is today. Nevertheless, there are still a few simple guidelines that can be followed to determine whether to use a bank or a broker.
Banks generally have very traditional policies and practices in place. You would be hard pressed to find a bank offering any mortgage products beyond what they have to offer. However, banks know it is important to be competitive, especially with their established customers. Therefore, bankers can and do offer better loan terms and discounts to their existing customers when they shop for a mortgage. Having an established banking relationship with fairly substantial holdings in two or more accounts means that your bank is the best place to start looking for a mortgage.
Obtaining a mortgage through a brokerage may be a better choice if there is no strong relationship with a banker. A broker has many different products to offer because they represent several lenders with a wide variety of financial products. A good broker can do a lot to help find the ideal mortgage by studying the applicants situation completely so they fully understand the needs of the borrower. This puts them in a position to recommend the best possible mortgage product and lender for an individual. A broker can be invaluable by doing much of the beginning application work and advising clients on the best way to display their current financial statements.
Some brokers charge fees at the beginning but for the most part brokers do not receive payment until the loan is closed. This means that on the one hand, a broker will be highly motivated to get their clients approved for mortgages. However, it also means that brokers may be indiscriminate in getting a client approved for a loan, without real regard to their individual needs. In 2007 the sub-prime mortgage bubble burst and inappropriate mortgage approvals directly impacted that situation.
If one decides that a mortgage broker is the right way to go, it is essential to do some research beforehand to ensure that the broker is reputable. The first step is to compile a list of potential brokers, usually brokers that friends or family have worked with or others active in the area. After this list is compiled, do some online research into their background. Are they properly licensed? Have they received many customer complaints? Have they been involved in legal difficulties? Most of this information can be obtained online from the Better Business Bureau, the state Attorney Generals website, as well as from news sources. The potential home buyer should remove any brokers that are improperly licensed or have had a lot of complaints or legal problems.
Once the list of mortgage brokers has been made and research done, the next step is to interview each of them carefully. Remember that each broker represents many different lenders and has access to a distinctive list of mortgage products. These consultations will put the potential homebuyer in a position to decide which brokerage can best serve their needs.
Wendy Polisi is the founder of Credit Repair College and Finance the Dream. Credit Repair College empowers people to take control of their financial future by learning everything they need to know to repair credit on their own. For more information on credit repair tips please visit them on the web. Finance the Dream offers rent to own homes throughout the United States.