When it’s time to take out a home loan, many people opt to go to the bank that already has their money. Some consumers, though, go to their credit union and still others go through a community or regional institution. The home buying process generally starts online, but ultimately, the majority of consumers go through a traditional lender.
The much maligned mortgage broker is currently the choice of about 1 in 10 home buyers, a stark contrast from several years ago, when brokers all but controlled the origination aspect of the borrowing process. The housing meltdown is now well behind the country, and the real estate market is showing healthy signs of growth, particularly in highly desirable areas, like the beautiful town of Sarasota.
Spectacular scenery and wonderful weather aside, if you are ready to purchase a property and need financing, you might be wondering which is better: a mortgage broker or a bank? With new federal regulations in place, the differences are somewhat negligible, but do exist. The answer really depends on your particular situation and what is most important to you.
HOME LOAN LENDERS NOW MORE ALIGNED WITH CONSUMERS?
The wave of new lending regulations resulting from the national economic downturn that started in the housing market are supposed to protect consumers. Several big banks, in reaction to the laws, chose to cut off mortgage brokers altogether, while smaller percentage retained relationships with established brokers, disallowing any newcomers. Brokers state this will ultimately hurt consumers, having less choice, however, banks must still abide by the law, and, must still compete with other traditional lenders.
“In seeking a mortgage, an individual needs to decide whether to apply to a bank or to use a mortgage broker. There are advantages and disadvantages with each strategy, as well as many choices of lenders and mortgage options available. Each person brings to the table their own knowledge, experience, financial needs and personal circumstances. Doing some upfront research can help you best prepare for the process, whichever road you take.” —Realtor.com
Those laws are intended to protect consumers; and, should banks want to stay in the lending business, will have to continue to offer more innovative loan products. What you ought to know is that getting a mortgage isn’t as difficult as you might believe. Though the rules have changed, banks are still approving home loans, even for applicants bringing less than 20 percent down payments. What’s more, there are new rules and products being offered by the VA, FHA, and other organizations, and with interest rates at still near record lows, along with home prices remaining affordable, that makes now a great time to buy a home.
MORTGAGE BROKER OR BANK? WHAT TO KNOW
If you are confused about which to go with, you’re certainly not alone. Even though mortgage brokers make-up a decidedly smaller market share of home loan originators, the ones which have survived the past few years are those who are adept at their profession, and therefore, deliver results. Here are some considerations to help you chose:
- Mortgage brokers have more options at their disposal. Because these licensed individuals are not employed directly by a bank or other lending institution, they can size-up each application and offer a few to several loan options. Though banks do have a bit of diversity, they are limited to their own product line.
- Banks are very careful about the approval process. While mortgage brokers generally have more options, they cannot guarantee an application will be approved. Banks, which are infamous for their slow-pace, carefully evaluate each application, which means a higher rate of approval and closing.
- Neither can guarantee a timeline. Speaking of guarantees, neither mortgage brokers or banks can guarantee when an application will be approved and when the closing will occur. Though a date will be set, know that it isn’t unusual closing dates and times change, sometimes because of changes in the borrower’s financial status, such as opening new lines of credit before settlement day.
- Contact times and options differ. Banks will be closed on weekends and holidays, while most mortgage brokers will be available. That being said, just because you can speak or communicate via email with a broker doesn’t mean that anything can be done that very moment.
- Control over the process. Here again, neither really stands out as the better, though a mortgage broker will provide more individualized attention and be more nimble should something go awry, they do not have an exclusive grip on the process. Banks, though ostensibly in-control, are too limited by what they can do to respond to changes.
The bottom line is, you have the power to take the time to research your options, weigh the pros and cons of each, and then decide which is the best choice for you to get a home loan.