Should I Choose a Broker or Bank for My Mortgage?

Lending from a Lender or Bank

When choosing a mortgage, it’s important to not only consider what type of loan you’re looking for but also what lender you should choose.

In addition to banks, known in the mortgage industry as “direct lenders,” there is a constellation of independent mortgage brokers who can help you secure a quality loan.

However, particularly for a first-time home buyer, it can be hard to understand the difference between those two options.

In general, banks allow you to be more hands-on during the borrowing process and tend to be cheaper while brokers allow you to secure a complicated loan while shopping around.

Here is what you can expect from lending with a bank or mortgage brokers.

Lending From a Bank

Securing a loan directly from your local financial institution allows you to forgo the middleman in the mortgage process.

Loan officers at banks work directly with underwriters and the lending institution to give you more control over your loan application process.

Because going directly to the bank cuts out a middleman broker, the actual cost of securing a loan is often cheaper than with a broker.

However, it is important to note that banks are not required to disclose their profit margins when providing you a loan, which doesn’t help you when shopping around. In addition, banks tend to be far more conservative in their loan offerings, meaning investors in need of a custom loan may find their options lacking.

In general, lending from a bank is a great option for those seeking simple mortgages and more control over the application process. Unlike brokers, who have no control over the underwriting process, a bank offers an in-house application process that can get your loan moving.

However, banks are allowed to withhold off the deal so it can be difficult to compare costs while shopping around.

Lending With a Mortgage Broker

Mortgage brokers work as middlemen between home buyers and wholesale lenders to find quality loan options.

An expert mortgage broker can help investors find and secure complicated loans that fit a range of needs. Unlike banks, some brokers can find almost any sort of loan you are looking for to finance your home or other property.

Brokers are also required to disclose their profit margins when finding your loan, meaning you can shop around to find a broker that fits your budget. As opposed to banks, the process is transparent and gives you a wide range of options.

However, mortgage brokers do tend to be more expensive than banks because they have to cover their own costs and that of your lender. Unlike a direct lender, brokers do not handle the entire loan application process in house. That means you may be left waiting for your loan to get approved.

In general, working with a qualified mortgage broker gives you a wide range of options for your loan needs without the constraints of a bank.

Brokers are more transparent in their rates so enterprising home buyers can also find a good deal.

However, a broker typically is more expensive and aren’t hands on with your loan.