Did you know that 31% of homebuyers in the United States last year were first-time homebuyers? Buying a home can be a confusing and overwhelming process, especially when it comes to getting a mortgage.
You’ll need to decide between going through a mortgage broker vs mortgage banker when determining the best way to finance your home. In order to make the best decision for you and your family, you need to know the difference between a mortgage broker and a mortgage banker.
Thankfully, you’ve come to the right place to learn more about whether a mortgage banker or mortgage broker is a better fit for your needs.
Continue reading to learn more about what mortgage brokers and bankers do, and the differences between them, as well as the benefits of each.
What Is a Mortgage Broker?
A mortgage broker is someone like Hunter Galloway, who has indirect access to the money that you need for your home loan. This access comes by way of established relationships with different banks and lenders.
The way that a mortgage broker works is by matching the finances that you have with those of a mortgage bank. The mortgage bank will help to fund your loan but they will not loan you any money directly. The money comes through the broker.
The paperwork that is needed is entirely in your name, except for your initial application with the mortgage broker. You also won’t discover which bank is funding your home loan until after the initial loan disclosures.
From there, the loan is processed by an employee of the mortgage broker and sent to the bank that is providing the funds. The process is then handled by the bank, from processing to closing.
What Is a Mortgage Banker?
A mortgage banker is someone who works for a mortgage bank or a lender. The mortgage bank is the institution that has direct access to the funds that you’ll need in order to get the loan for purchasing your home.
This money usually comes either directly from the bank’s own bank account or from the funds of its investors. The process with a mortgage banker works by you submitting an application for a loan to a lender.
Once your loan application is accepted, the bank or lender will directly provide you with the money you need. From there, you’ll make your mortgage payments directly to the bank that lent you the money, starting when your loan closes.
One thing to know about mortgage banks is that the only type of loan they offer is mortgage loans. There will not have any options for checking accounts or savings accounts, as well as car loans.
The mortgage bank will also have mortgage processors and underwriters that work for them, so all of those stages of the loan process are handled internally by the mortgage bank.
From there, all of your documents will get squared away and then uploaded to a central site for processing.
Pros and Cons: Mortgage Broker vs Mortgage Banker
There are good and bad things that come with choosing a mortgage broker, as well as a mortgage banker. In order to make the most informed decision for your family, it is important that you’re aware of the pros and cons of each.
Pros and Cons of Mortgage Brokers
A big benefit that comes from working with the best mortgage broker is that they have access to a variety of banks and lenders. This means that there are more and better loan programs and interest rates than if you went through a mortgage banker.
Mortgage brokers also have the benefit of setting their own profit margins. This means that they’re usually easier to negotiate with when compared to a mortgage banker. Best of all, the compensation that a broker gets is clearly advertised on your closing statement.
A drawback to going through a mortgage broker is that they have much less control when it comes to the underwriting portion of the process. This is because the underwriter doesn’t work for the lender of the funds.
Brokers also tend to be more expensive than if you choose to go through a mortgage banker. This is because they get more complex loans than mortgage bankers do, which drives up lender costs.
You also need to accept that it might take longer to close on the loan if you choose to go through a mortgage broker. This could be a problem if you have a close deadline for buying your home or refinancing it.
Pros and Cons of Mortgage Bankers
A big pro of choosing to work with a mortgage bank is that it gives you a large amount of control over your application process. You can choose the mortgage bank that you want to work with and negotiate your own rates and fees.
You also have the benefit of knowing that the same people are working on and processing your loan from the beginning to the end. This means more communication and cohesion between you and the lender.
A drawback of going through a mortgage banker is that they’re not required to disclose the amount of money they make off of your loan. This could lead to you paying more than if you’d shopped and negotiated more aggressively.
Mortgage banks also tend to offer fewer options and types of loans for your home loan than a mortgage broker would. If they don’t carry the type of loan that is best for your situation, it is possible that they won’t disclose that so as to not lose your business.
You also run the risk of being declined if the bank is more on the conservative side with who they provide financing to. This could be the case even if you’re a great candidate for financing.
Get Your Mortgage Today
When choosing a mortgage broker vs mortgage banker, there are a lot of things that you need to consider. It is possible that a mortgage broker is a better option for your situation due to the options that they present.
If you’re working on a tight deadline and want more control over the mortgage financing process, then choosing a mortgage banker is going to be a better fit for your needs.
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