When it comes to searching for the right kind of mortgage to meet your needs, you will probably come across a decision about who you should borrow from: Do mortgage brokers or banks make better lenders?
A mortgage broker is a mediator that facilitates the process of acquiring a mortgage for individuals as well as businesses. Essentially, they are like home loan supermarkets. Their broad access to lenders as well as their wide offering of various programs makes them a convenient source of help for many borrowers. If you have less-than-perfect credit or are in unusual circumstances, mortgage brokers can still find you the type of funding you need. Mortgage brokers will charge a broker’s fee, which you should ask about and take into account when calculating your initial payments.
Mortgage brokers will typically originate, process, and pass the loan on to a lender who will subsequently sell it to an investor. They take commission and will have higher closing fees. Beware of gouging, as brokers have full discretion on how much they want to charge the borrower for processing the documents necessary for the loan.
Today, about 20,000 mortgage brokerage operations account for more than 80% of mortgages are issued by mortgage brokers in the U.S. The convenience and resources they offer to borrowers is the key to their popularity.
The term “mortgage banker” refers either to an individual loan officer who works at a bank or to the bank itself. They specialize in originating mortgages and selling them to investors and continue to service them. Both the origination and servicing processes require fees, which are the two primary sources of income for mortgage banks.
A key difference between mortgage banks and mortgage brokers is that banks have more of a standardized and set approach to setting fees. Bankers are told what fees to charge and are told not to stray away from them. This allows for more stability and prevents the borrower from being surprised when it comes to discovering what the fees for the home loan will be.
Now the question is which is the better option? The answer is quite simple: Whoever gets you the better deal. It should be noted that while some borrowers enjoy the comfort and help of having a mortgage banker see them through the life of their loan (though not all do), while others do not mind either way. This discernment, along with a thorough comparison of deals that you can get from mortgage brokers and bankers, should give you a fairly clear idea of which path to take.
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