For homeowners, choosing between a mortgage broker vs bank is very hard. First-time homeowners especially find it hard to select the right financing option. Read on to find out which financing option would suit your preference.
Home financing whittles down to two major options, a mortgage broker or a bank. The option that suits you depends on a couple of factors. This piece will explore the benefits and pitfalls of each financing option, so you make the right choice.
Owning a new home is an exciting prospect. If you’re like most people, then you need a home loan before moving into a new home. Your circumstances will determine which option, mortgage vs. bank, best suits you.
How Do Banks Finance Home Loans?
Banks use money from their reserves to finance your home loan. These banks have processors, loan officers, funders, and underwriters under their umbrella.
These professionals are under strict instructions to facilitate your home loan. A loan officer receives volume incentives from home loan arrangements.
Because of stringent bank regulations, loan officers are a bit rigid on their terms. But good credit or a strong relationship with the banks always works well for your financing.
To the bank, your home loan is an asset. It can, therefore, add to the lender’s portfolio or later sold to investors for profit.
Loan officers may have various price points for the same loan. Expensive loans have more expensive rates compared to less expensive loans
Advantages of Banks for Home Loans
Depending on your situation, the bank may be the best choice for your home financing. Settling for a bank loan has the following benefits.
1. Make’s Home Financing Easier
Thanks to the bank’s loan officer, finding a home loan will be easy. The loan officer has both you and the bank’s interest at heart.
Loan officers get you the best deals that you are qualified to have. Their experience makes the process much quicker and very efficient.
2. Direct Line to the Lender
With a bank loan officer, you access your lender directly. Meaning, any queries, questions, or issues are addressed comprehensively.
You get to rest easy knowing there aren’t any hidden costs that may do you in later.
3. Guaranteed Professionalism
Banks finance a lot of human resources to facilitate your home loan. Loan officers and underwriters work in concert with the banks to ensure successful home financing.
You can also rest assured of no underhand or dubious dealings. This guaranteed professionalism is great for peace of mind during your home financing
The Cons of Banks for Home Financing
Banks and loan officers are not without their cons. Here are some disadvantages of choosing banks for your home loans.
1. Limited Options
A loan officer offers loans only from the bank. This exclusivity means fewer options and discounts for non-customers of the banks.
2. Less Room for Negotiation
Loan officers always abide by bank regulations. These mandatory regulations decreases the chances of success from negotiations.
3. Doesn’t Accommodate Bad Credit
Banks do not allow financing for individuals with bad credit. Folks with bad credit are better off finding financing from a mortgage broker.
3. Self –Employed
Due to the uncertainty of self-employment, banks are reluctant to offer home loans to the self-employed.
When Is the Bank a Good Option?
- If you already have a good relationship with your bank
- If you have a job that pays regularly
- If your credit ratings are good
- If you are unfamiliar with home loans and need some guidance
How Do Mortgage Brokers Work
Brokers act as middlemen between wholesale lenders and you. The brokers may get a commission from mortgages brokered or receive a fixed salary.
These wholesale lenders are usually smaller banks. They have less stringent regulations and are easy to negotiate with.
A mortgage broker finds the best option for you depending on your current situation. Brokers usually guide you through the entire process.
Here Are Some Pros of Opting for a Mortgage Broker
Most folks choose mortgage brokers for their home financing. The following are some reasons why.
1. Plenty of Options to Choose From
Unlike loan officers, mortgage brokers don’t work for just one institution. The best mortgage broker can offer you several financing options. They also help find the best-suited option for your situation.
2. Helpful Intervention
Brokers can negotiate on your behalf to improve your chances of landing a mortgage. This intervention can significantly increase your chances of getting home financing.
3. Help With PaperWork
It’s no secret, paperwork for applying mortgages suck. Brokers can help take a load off by doing most of your paperwork.
So you can focus on more important stuff like house shopping.
Cons of Mortgage Brokers
Settling for mortgage brokers may have some drawbacks. These drawbacks include:-
1. Expensive
Brokers generally tend to be more expensive than banks. This costliness is because most brokers want to make a good commission for brokering.
2. Usually takes Longer
Depending on your lender, your mortgage may take a while to mature. So if you have a tough deadline, a broker may not be right for you.
3. Less Control
Brokers have less control over the mortgage. Unlike banks, you have limited communication with the lender.
This indirectness makes it harder to solve issues or get straight answers to any queries. Save for the best mortgage broker in Brisbane.
Mortgage brokers are an Ideal choice for if:-
- You are self-employed
- You have a low credit rating
- You have a muddy relationship with your bank
- You have limited financing options
Mortgage Broker Vs Bank: Which Should I choose?
Ultimately, the choice of mortgage broker vs bank depends on your circumstances. Remember to be keen on home loan rates. The rates should be a pivotal factor in determining your final choice.
The major difference between a mortgage broker and bank is the methodology. All in all, you get your financing and own your brand new home without much fussing.
So be it bank or mortgage broker, you will get financing. Most people would, however, prefer the latter.
You can check out other pieces for more helpful reads on house investing and other informative articles.