Before you sit down to complete your mortgage application, you will need to decide which loan program you want to apply for. This process often also comes with the decision about whether you should work with a mortgage broker or work directly with a bank when applying for a home loan. Some people who apply for a home mortgage loan will simply shop for a loan program without making a conscious decision about whether to go through a bank or a mortgage broker. Once they find a loan program they like, they will apply for it. However, there are some good reasons why you might want to take a closer look at the differences between a mortgage broker and a bank before you apply.
What Is a Mortgage Broker?
First, you should understand what a mortgage broker is and what role this individual plays in the mortgage process. Generally, you will need to work with either a mortgage broker or a bank loan representative in order to apply for your mortgage. However, a mortgage broker is different from a bank loan rep in a number of ways. A mortgage broker is a professional who works for a company that is not directly affiliated with any one specific bank. The mortgage broker may show you multiple loan programs from different banks to compare, and this can benefit you by simplifying the process of shopping for a new mortgage. The broker is not obligated to sell you specific loan programs, and because of this, it may be possible to find a superior loan program through a mortgage broker. About three quarters of buyers who work with a mortgage broker report being satisfied and would use a broker again or recommend to friends that they use a broker. In addition, a mortgage broker may provide you with honest information about the loan program that is best for you. This, however, is not always the case.
A Look at Bank Loan Reps or Bank Mortgage Specialists
Bank loan reps, mostly often referred to as Mortgage Specialists, are employees of a specific financial institution. Because of their affiliation, their primary goal is to sell you a loan that is offered through their bank. A loan rep from one bank will not offer you a loan from another bank, so loan options available through mortgage specialists are fairly limited. A bank loan rep or mortgage specialist will, however, help you to find the best loan program available through that particular bank and may work with you to structure the loan in the most advantageous way possible. The bank loan rep may also be more familiar with in-house lending requirements and unique lending situations, and this knowledge and expertise can benefit you as you apply for your loan.
Generally, working with a mortgage broker costs you about the same amount of money at closing. You will be responsible for all of the standard bank fees with both options, but a mortgage broker makes money by charging a fee. In most cases, however, the mortgage broker receives their fee directly from the lender (who will be profiting from the interest you will pay over time). There may, however, be unexpected legal fees for a new mortgage, sometimes as high as $1000. It's not unusual for a lender to cover legal fees and even appraisal fees, so you should inquire about your options before you agree to your terms.
The Benefits and Drawbacks
There are some benefits associated with working with a mortgage broker, especially since their services don't come with any added cost. When you work with a mortgage broker, he or she may shop your loan request around to a larger number of lenders. If you work directly with a bank, you can do this yourself. Therefore, you may still wind up with the best loan program with either method. However, when you work with a mortgage broker, you will not necessarily have to spend as much time shopping on your own, because the mortgage broker will do this work for you. Since mortgage brokers are experts in the field, it can be a comfort to let them do this legwork for you.
Comparing the Options
The fact is that there is no right or wrong option that is best for every individual in every mortgage application situation. Each mortgage broker as well as each loan rep will put forth a different amount of effort in helping you find the right loan for your needs. Some may be more helpful than others. Because of this, it is often best to delve into the mortgage application process by exploring all of the options in greater detail. If you are interested in applying for the best loan program available to you, you should take the approach of leaving no stone unturned. Use the services of a mortgage broker to help you shop, but also put forth your own effort to shop directly with the banks; you can even explore your options online. You will then have access to numerous loan quotes. With these quotes, you can compare the rates and fees for all options.
When You Shop
Understanding the differences between a mortgage broker and a bank loan rep is important, but it also can create confusion. Should you only contact banks directly when shopping for a mortgage, or should you only seek out the services of a mortgage broker? When you shop for a loan, you should consider how much time and effort you are willing to put into the task of finding a great loan program for your needs. Shopping for a mortgage loan is not as complicated and time-consuming as it once was, but it can be overwhelming. One reason for this is because of the many loan comparison websites that you have access to. You may consider using one of these websites to learn more about the options, but keep in mind that many of these websites have loan programs listed from both brokers and banks. If you shop with a broker, be sure to inquire about who the actual lender is for a loan program that you are interested in before you apply.
Whether you make a conscious decision to only work with a mortgage broker or a bank loan rep. mortgage specialist or you compare all of the options and make your decision based on loan terms offered, you will find that both brokers and bank loan reps are generally dedicated to assisting you throughout the process. Both understand that they must provide you with the best loan terms they have available in order to earn your business, and you may discover that shopping for a new mortgage loan can be easier to do than you once thought.
Interested in learning more about mortgages?
- Read: Tips To Pay Off Your Mortgage Sooner
- Read: Mortgage Closing Costs
- Read: Mortgage Pre-Approval Process
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