First, let’s look at the main differences:
MORTGAGE BROKERS |
BIG BANKS |
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Now, let’s look at some Pro's and Con's for each.
BIG BANKS:
PRO'S:
- One-stop Shopping. Home loan services are usually offered at your primary banking institution. You may benefit from having multiple accounts/account types with the same bank. In addition, you may already have a level of trust established.
- Access to Information. Your bank already has access to a great deal of information, such as bank balances and account histories. This may make the qualifying process a bit easier.
CON’S:
- Limited Options. Borrowers who have trouble qualifying for a mortgage or need non-traditional or more complex financing options will often get turned away at the big banks. Larger banking institutions might only offer conventional mortgages.
- Retail Interest Rates. Typically, your local bank can only offer you retail interest rates, which tend to be higher. The lower, wholesale rates are only accessible through a broker.
- Non-disclosed Commission. Banks are not required to disclose commission rates, which means that you could be unknowingly overcharged.
MORTGAGE BROKERS:
PRO’S:
- Variety of Options. “Brokers typically have access to far more loan products and types of loans than a large-scale bank, whether it's FHA loans, VA loans, jumbo loans, a USDA loan, or simply a borrower with bad credit,” according to thetruthaboutmortgage.com.
- Personalized Loan Experience. A mortgage broker may be able to create a solution for your individual challenges, such as having a low down payment, limited credit history, or the desire to limit closing costs and/or avoid mortgage insurance.
- Interest Rates May Be Lower. Wholesale rates may be much cheaper than the retail interest rates offered by the banks.
CON’S:
- Commission Rates Vary. If a mortgage broker takes too much off the top for their own fees, you may lose the full value and impact of a lower interest rate.
As you can see, there are definite pro’s and con’s to both. Your choice of mortgage broker or bank will largely depend on your loan scenario and individual needs. For example, you may have little choice between the two if you have poor credit or a tricky loan scenario.
Ultimately, as explained by thetruthaboutmortgage.com, it’s in your best interest to “compare the two to ensure you receive the lowest rates”.
Sources: thetruthaboutmortgage.com; themortgagereports.com; thelendersnetwork.com