Buying a home can be an exciting and stressful process at the same time. It gets more challenging when you’re a first-time buyer. Before you can start shopping or looking for a real estate agent, you’ll need to figure out how much you can afford. This could mean getting in touch with a mortgage officer so that you’re aware of your options. You’re likely to be working with the person for years and that is why it usually recommended getting someone that can be trusted.
You’re likely to be faced with the option of working with a bank or mortgage company. There is no one solution that fits all as what you’ll settle on will depend on a couple of factors. Before you can make a decision on where you get a loan, it is imperative that you have a good understanding of the two options.
How Banks Work
The mortgage bank will in most cases use their own money to fund the purchase of the house. They will have a loan officer that is supposed to handle the sales aspect of the transaction. It is possible for the loan officer to offer the same product at different price points.
Working With a Broker
Brokers will be the bridge between the potential buyers and wholesale lenders. A typical broker doesn’t have the financial muscle of a bank but will provide different products for those looking to buy a home. Since brokers will work with different wholesale lenders, they might be able to provide borrowers with a variety of products at different price points. That is why you might opt to work with a broker like Wealthy You instead of going to a bank to finance the purchase of your home.
Advantages of Working With a Bank
The bank will work on your loan right from the moment you make the application up until it is finalized. There will be a loan officer dedicated to your accounts and will coordinate the different processes and communication so that there is control and accountability. It is also easier to get your loan approved if you’ve worked with the brick-and-mortar bank in the past or have an account with them.
Cons of Banks
There is no law that makes it a requirement for banks to be upfront about how much they’ll make on your loan. You could end up paying more than you should if you’re not savvy enough. There are fewer products to select from and you could end up settling on what is provided by the bank even when it is not ideal for your individual circumstances. There is also the possibility of your loan application being rejected, especially when working with a conservative bank.
Pros of Working With a Mortgage Broker
Mortgage brokers have different rules governing them and will operate differently compared to banks. You get to have a variety of products because they’ll be working with different wholesalers. You’re more likely to get a product that is suited for your needs. Since brokers are the ones responsible for setting their own profit margins, it is easier to negotiate on the rates. The amount the broker will be paid as compensation will also be clearly indicated in the closing agreement.
Disadvantages of Brokers
There is no real control over the process because the broker will be working with different lenders. You can find a broker that is only interested in getting their commission and will not work in your best interest. You’re also likely to pay depending on the complexity of the loan if you’re working with a broker. It might not be a good idea to take this kind of loan if you’re working on a tight deadline as they generally take longer to close.
Should You Use a Broker?
If you have clean credit and want a straightforward transaction, working with a bank could be the best option to save time and money. If you’re experiencing challenges with the application process, working with a broker could be ideal as they know about flexible lenders that can assist with your particular situation. The majority of brokers also offer competitive pricing in order to have an edge and get clients. In order to have a clear picture of the best option, you can ask for a quote after factoring in your financial situation. Sometimes the best option might not be beneficial in the short-term but can save you thousands of dollars in the long-term.