If you are looking to get a mortgage, there are two main avenues that you should explore. The first is using a mortgage broker and the second is a bank.
There are some mortgage brokers who operate as middlemen between the mortgage lenders and the banks. They help secure the financing for the homeowner. And then there are banks and lenders who deal directly with the homeowner to give the necessary financial loan on a retail level.
Around 10% of all home loan originations are by mortgage brokers. Let us take a brief look at how both operate.
How banks operate
To fund mortgages, mortgage banks use their own money. They have their own loan officers, underwriters and processors. All these people work for the same organization.
How brokers operate
Where wholesale lenders are concerned, brokers act as the sales force for you to get a mortgage. Wholesale lenders dispatch their broker rate card which consists of a list of prices and rates for each individual product.
By and large, brokers are smaller entities when compared to banks. Where a loan with a higher rate is concerned, there may be rebate pricing, the cash that is needed to pay the commission of the broker and other closing expenses on the behalf of the borrower.
This rebate is referred to as YSP or Yield Spread Premium.
In short a mortgage broker acts as an intermediary who gets mortgage loans on behalf of individuals or businesses.
A mortgage broker works with several mortgage lenders and banks and submits your loan file to them to issue the loan
Some points to consider before deciding
• They are both a good choice for a homeowner to get a mortgage
• Your loan scenario is an important consideration before you come to a decision
• A comparison of the two is necessary so that you can get the lowest rates
• Check your specific needs first before you try to get a mortgage.
• If you have poor credit, or a tricky loan scenario, there is little choice between the two
A look at the interest rates
• Rates of brokers are more reasonable in most cases
• Make a comparison between wholesale and retail interest rates
• Ensure that you use the right vendor so that you don’t pay too much on your home loan
As far as pricing is concerned, there are chances that the mortgage broker will be just as competitive as a bank. When it comes to wholesales rates, they may even work out to be cheaper than retail interest rates that you will get at the bank of your choice.
This will mean a monthly mortgage payment that is lower.
What you will experience with banks and mortgage brokers
Brokers and banks are considerably different; in service and in price.
When you deal with a broker, you deal with a single individual. He or she may come highly recommended. But when you deal with a bank, there are hundreds of employees.
Your experience at the bank will totally depend on the employee who is handling your case. That is why if you are looking for guidance through the loan process, a mortgage broker may be a good choice; especially if it’s your first time buying real estate. With their commission on the line, they may end up doing more for you.
In conclusion, mortgage brokers are a good choice, if you happen to be shopping for a loan. However, it is best to compare rates and services with those of your local bank to be sure.
October 13, 2018