There are a couple of ways that a person can obtain a home mortgage. The two that I’ll discuss here are banks and mortgage brokers. Neither one is better or worse than the other, but take some time to know the difference between the two and what your options are for securing the best loan for you and your home.
Everyone knows what I mean when I say bank. It’s the Wells Fargo, SunTrust, Bank of America, Chase, U.S Bank, etc that we see all over the place. Most people use or have used these institutions to hold their money and are aware that they also offer home mortgage loans for patrons. The majority of people will turn to their banks for a mortgage since they have dealt with them for other financial needs. The banks have their own requirements and guidelines that they need to make sure you meet in order to give you a mortgage.
Picture a square box: four sides, basic, simple. Now picture yourself. Do you have great credit? Have a strong employment history with two years tax returns proving it? Do you have plenty of money in savings? If you answered yes, great job! You’ll most likely be able to qualify for a loan with a bank!
If you and your financial situation maybe aren’t a square: had some credit issues in the past, maybe are self-employed and your tax returns are a bit muddled, etc- You may have to see what other mortgage options you have available.
A mortgage broker is a less known entity in America. Mortgage brokers act more as a middle-man between financial institutions who lender mortgages and you as the buyer. There are requirements that need to be met with a mortgage broker, however they are able to shop around for better rates, different programs with different restrictions, and are therefore able to entertain buyers who may have a hard time qualifying with a bank for whatever reason.
Pros of working directly with banks
- You may already know and trust the bank and the banker who will handle your file
- Ability to link your mortgage to your existing accounts to make payments easier
Cons of working directly with banks
- More conservative loan products
- More “hoops” and bureaucratic limitations
- May not be as experienced or educated about a mortgage (if they are a general banker)
- Potential additional fees or higher prices for loan and closing costs
Pros of working with a mortgage broker
- They shop around for different loans on your behalf, finding the best possible rate and program for you
- Potentially lower rate
- Typically easier to get in touch with, most working solely on commission and doing whatever it takes to get the deal done
- Can entertain tricker loan situations (i.e. lower credit scores, self-employed buyers)
Cons of working with a mortgage broker
- They are human and can make mistakes like anyone else
- Could be less truthful about the actual situation if they don’t want to make you upset or lose the deal
It basically comes down to what type of help you need for your individual situation in order to get you financing for a house. If your bank says no to you, try contacting a mortgage broker to see if they can find a loan that you will be able to qualify for.
Remember, you are allowed to pull your credit 3 times in 90 days by a financial institution while shopping for a mortgage. Don’t get stuck thinking you have no options to talk to other lenders when you absolutely have that freedom.
Read more about how to qualify for a mortgage.