You can use a mortgage broker to obtain mortgage quotes from several lenders, or you can go directly to one or more banks and get the quotes yourself. Depending upon your banking history, the details of the property you plan to purchase, and your credit rating, either approach might be right for you. Understanding what kind of mortgage you need is the key to getting the best deal, whether you use a broker or go direct.
Using a Broker
A broker obtains offers from multiple lenders, including bank and non-bank mortgagors. Brokers often assist clients with paperwork and help ensure that lenders process applications in due time. You begin the process by contacting a broker and telling him about the property you want to finance. Your broker will want to know your personal credit history, assets and employment. He'll then suggest and contact appropriate lenders.
You probably don't need a broker if you want to apply for a mortage at a bank where you already have a savings, checking, loan or credit card account. Some banks don't work with brokers. Instead they advertise their mortgage options online and offline, and you can contact them yourself through their websites or by telephone. Some banks even let you find out online whether you are qualified for their loans.
A broker's main advantage is that he works with more than one lender, and this means he can get you terms that you might not be able to obtain yourself. Brokers can represent lenders that you might not be able to find on your own, either because they don't advertise or because they don't deal directly with the public. A broker places mortgages on a constant basis, so some lenders are willing to give better terms for brokered mortgages. Because they earn a commission only when you sign up for a mortgage, brokers often provide professional application assistance to customers.
If you pay the broker's commission, you might pay more for your loan, with terms no better than a bank loan that you could find yourself. If a lender pays the commission, the broker has an incentive to place your mortgage with that lender even if it is not the best one for you. Some banks do not deal with brokers, because of the perspective that brokers increase costs to the consumer and might not always act in a consumer's best interest.
Bank Advantages and Disadvantages
A bank does not charge commissions for its own mortgages. Banks are far more regulated than mortgage brokers are, so banks must follow much stricter rules and ethical guidelines when it comes to mortgage lending and processing applications. However, banks offer only their own mortgage products. And you don't have as much negotiating room with a bank as when a broker approaches different lenders on your behalf.
John DeMerceau is an American expatriate entrepreneur, marketing analyst and Web developer. He now lives and works in southeast Asia, where he creates websites and branding/marketing reports for international clients. DeMerceau graduated from Columbia University with a Bachelor of Arts in history.