Should You Use a Mortgage Broker or a Bank Loan Officer?

Shopping for a mortgage can be intimidating. There are thousands of mortgage lenders and hundreds of ways lenders can tweak home loans to distort their real costs. You’re also facing the excitement of buying a new home and you may feel vulnerable as lenders nit-pick your credit report. It’s understandable that many home buyers get stuck with bad mortgages because they just wanted to get the process over with. Unfortunately, that’s no small mistake: On a 30-year mortgage, fractions of a rate point can add up to tens of thousands of dollars.

Want to avoid a similar fate? It’s all about knowing how to shop for a mortgage.

Banks and Credit Union Loan Officers

The simplest way to apply for a mortgage is to walk into your local bank or credit union and sit down with a loan officer. He or she will take your application and, hopefully, present a number of different loan options for your situation. Depending on the bank, you may get a really good deal, especially if you’re already a loyal customer.

Small local banks and credit unions often offer the best mortgage rates. Trouble is, many of them only lend to people with truly immaculate credit. This alone can rule-out many first-time buyers who simply don’t have long enough credit histories yet.

But let’s assume your bank offers you a loan. Unless the rate the bank offers is lower than national averages, how do you know it’s the best deal? Unfortunately, you don’t. So you head down the street to get a quote at another bank or you go to a mortgage broker.

Mortgage Brokers

Mortgage brokers match borrowers with lenders. They work as “free agents” for multiple different lenders and earn a fee or commission when they sell a mortgage to a bank. Just like talent agents shop aspiring actors to movie studies, mortgage brokers approach different lenders with borrowers’ applications.

Good mortgage brokers should be able to find borrowers the most competitive rates and also find loans for borrowers with less-than-perfect credit. So shop around and negotiate for your loan: Don’t blurt out the highest rate you will accept and never be afraid to push for a better deal.

Finding a Mortgage Broker

Many mortgage brokers are independent and work out of small offices or their homes; the best way to find a good one is often to ask friends or family for a referral or pick up a local directory.

Another option is to work online: Sites like housingloan are essentially virtual mortgage brokers; you enter your application and they shop it around, often instantly, to multiple lenders.

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