Buying your first house is both an exciting and overwhelming decision. A house is a big purchase, and unless you have millions in the bank, you might not be able to buy one upfront. Your best option is to get a mortgage.
While there are various home-financing providers that you can turn to, two of the most common ways where you can get a mortgage is by either heading straight to a bank or getting in touch with a mortgage broker. Choosing one over the other may depend on your financial situation or your preference.
To help you decide, here’s the lowdown on applying for a mortgage through a broker and a bank.
How Mortgage Brokers Work
A mortgage broker act as the middleman between you and the lenders. They are connected to a wide network of lenders, with each one having their own products and loan structures. The goal of a mortgage broker is to find the mortgage product with the best rate and structure that matches your needs. Before you go house-hunting, a mortgage broker will ask you for specific information, including your employer, salary history, investments, and debts, to check if you pre-qualify for a mortgage and determine how much money you can borrow.
How Banks Work
When you apply for a mortgage through a bank, you will be assisted by loan officer. They act as the bank’s sales force and will only sell products offered by the bank. Just like in getting the services of a mortgage broker, you will need to undergo a prequalification process before you can apply for a mortgage through a bank. Loan officers offer the same loan at various price points, usually depending on the loan period you choose and how much down payment you make, and the prices they charge may not be negotiable.
Benefits of Having a Mortgage Broker
Mortgage brokers work with hundreds of lenders. Some lenders work exclusively with mortgage brokers, relying on them to bring in clients. Mortgage brokers will help you find the best lender and mortgage product that fits your needs, whether the mortgage comes from a bank, trust, insurance company, or a private moneylender.
Mortgage brokers who have been working with lenders for a long time and who have generated high volume of business for these lenders may be able to get special rates or discounts. They can also negotiate for you so you can get rates that may significantly be lower compared to what you can get if you go to a bank or deal with a moneylender.
If you go mortgage shopping on your own, you have to call up or visit different banks and lending companies. Then, you have to go through the loan products each one has to offer to identify, which one could be the best option for you. This can take a lot of time and if you’re not familiar with financial jargon, you might just end up getting more confused. Mortgage brokers can help you do the legwork and present you not only with the loan products that closely match your needs but also will provide you financial advice on related insurance and payment protection plans.
If you’re ready to buy a new home, having a mortgage broker may be better than going to a bank. Mortgage brokers can assist you through the prequalification process and find the best loan product for you in fast and convenient manner.