One of the first decisions you will make when deciding to seek out a home loan is whether you want to work with the help of a local bank or a mortgage broker. Both have their advantages – and disadvantages – so in this article, we will help you break those down to make the best possible decision for your needs. No matter where you eventually find your loan, this knowledge will help you to protect yourself against shady schemes and instead, walk away with the best rates and terms available based on your credit history and financial state.
When you contact a bank, credit union or other financial institution for the purpose of securing a mortgage or home equity loan or line of credit, you will be put in touch with the loan officer. He or she is a direct employee of the institution, whose job it is to review your credit report and discuss with you your needs in order to determine what sort of financing can be offered. Though you will be working with just one bank, the bank usually has several lending options available for home buyers, as well as people looking to renovate or take a second mortgage against their homes.
The advantage of working with a bank or credit union is that you are able to handle your transaction locally. The officers with whom you negotiate the terms of your loan will be familiar with your area and specific terms that relate to real estate in that area. You will be able to stop in an ask questions as you have them, and you will also have the benefit of their experiences as residents and neighbors. The disadvantage is that a financial institution only has so many options available from which to choose – each one has a set number of lending programs that may or may not be a good fit for you.
Conversely, a mortgage broker is not employed by or committed to working for any one specific financial organization. Rather, they work as freelance agents, comparing deals and rates for sometimes hundreds of different lenders. Because they are acting as matchmakers between lenders and borrowers, brokers get paid on commission when they make a successful connection.
There are some advantages to working with a mortgage broker. For instance, brokers are able to look at the offerings of many, many lending agencies to compare terms and find you the closest match possible for your personal needs. Since they have so many options at hand, they are also able to find home loans for people with a wider range of debt issues and credit scores. They can often secure loans for people with credit ratings that banks will not even consider. The disadvantage of working with one is that he or she is likely to find you a deal with a company that is not familiar with your state and some of the real estate terms that are standard practice in your area. If they encounter questions or concerns, your closing may be postponed until those issues are resolved.
Ultimately, it is important to shop around before making any big decisions. Bringing copies of yourcredit score when you visit loan officers and brokers is also a wise idea; that will enable them to give you a better idea of whether or not you will be approved without having to pull your reports (a process which, when done too frequently can hurt your rating). As with anything, comparison shopping is key. Why not begin with a handy free quote from us?