You are in the market to buy your first home; you want to do everything right because this is a big decision, one that will be a part of your life for the next 15-30 years. The mortgage lender you decide to handle your mortgage is a very big part of this decision process.
Mortgage brokers v Traditional Banks
When you are looking for ways to finance your first mortgage there are two ways to go about it. You can go through a mortgage broker or a bank. This section is going to show the difference between a mortgage broker and a bank:
- The mortgage broker is a go between for you and the lender; while the bank works directly with you, the borrower.
- A mortgage broker can scan a rate for the loan amongst several lenders; a bank has only one rate to offer.
- A mortgage broker searches all at once for the best prices; a bank can only offer the rates and prices that is at that bank.
An estimate of ten percent of all home mortgages begins with a mortgage broker. The mortgage broker works as the intermediary between the lender and borrower, providing loans on the wholesale level; doing all the paperwork, negotiating terms and finalizing documents.
The banks will work directly with the homeowner/borrower, and provide loans on the retail level.
Mortgage brokers are a big part of the housing industry, proving their advantageous to future homeowners as well as current homeowners seeking to refinance their current loans.
As with anything, there are pros and cons involved, particularly if your credit is not so good or you have a bit of a complicated loan situation.
The most obvious choice when looking for a mortgage lender is the person’s bank; it is sort of a “one stop shop” providing trust that already exists in the relationship. A mortgage broker is the next best option for the borrower that has problems obtaining a traditional bank mortgage.
A mortgage broker has so much more access to the different types of loans that a bank simply does not have; loans such as FHA, VA, Jumbo loans, USDA loans, also loans for those who have poor credit history; where a bank would only have access to the conservative mortgages such as Freddie Mac or Fanny Mae.
A mortgage broker can give you much more of a personalized loan assistance. A mortgage broker can create solutions to your credit issues; no matter if it is a lower down payment you require, working with your limited credit file, or lowing any closing costs or mortgage insurance.
The experience you receive when using a mortgage broker will make the entire home buying or refinance process a much more enjoyable and learning experience. Where a larger bank might just flat out deny you for your credit score being too low; a mortgage broker can explain to you how you can improve your credit score, explaining how the process of determining a credit score works; what credit cards need to be paid off, and if you need to pay off some student debt so that you will be more successful in your future attempt at purchasing a home.