Mortgage Broker vs Mortgage Banks: What’s The Difference?
If you’ve Googled mortgage companies, you may have noticed that not all mortgage lenders are the same. On one end you have mortgage banks, and on the other, you have mortgage brokers – Both eager to tell you why they are the best home for your next mortgage loan!
So, what’s the difference? Well, let’s have a look!
Mortgage Broker Who?
A mortgage broker is someone who acts as a sort of middleman, between you (the homeowner) and the actual mortgage lender who is providing the funds. They help you to prepare loan applications, financial documents and can issue pre-approvals.
Mortgage brokers work with various lenders and banks and have the ability to shop around and get creative with your mortgage options. The broker will also take care of all paper-work, and work as your advocate to get approvals and exceptions where normally you might run into trouble. The lenders and banks often pay the broker a commission for a successful closing.
Okay, so what about the banks then?
So mortgage banks actually fund the loan internally. If you work with a bank, they’re going to set you up with their own loan programs. Often times they’ll offer excellent rates, but only if you meet their more strict minimum credit requirements. A bank can often offer lower fees to get the loan closed, but they also tend to be more limited in available loan options.
But who’s giving me the best deal?
So this is where your head might start spinning – Trying to figure out where you will get the best deal! Unfortunately, it’s not that cut and dry. We’re not dealing in absolutes here, as a mortgage broker will tend to offer better variety and options – And sometimes even a better overall loan since they can submit to multiple lenders at once, and tend to have the experience to know where you’ll get the best deals.
Keep in mind that mortgage brokers will typically give you lower rates and fees up front, since they don’t tend to have the huge overhead that a bank might have. For example, branch offices, regional offices, large corporate headquarters and the management expenses to run all of them. Banks often offer higher rates to customers to cover these costs. The banks also tend to have stricter requirements, and less flexibility. Once again, I have to reiterate that all of this is simply a rule of thumb – Not set in stone!
The best way to figure out which direction will be best for your particular situation is to have a full credit analysis performed by a mortgage professional. Here’s how to schedule a free, zero pressure mortgage review: