Your Local Broker vs. Your Local Bank

There are several advantages to choosing a Mortgage Broker for your real estate financing needs rather than a local bank. One advantage is expertise. If you needed brain surgery, would go to a general surgeon or an expert who specializes in brain surgery? Mortgage brokers are professionals who specialize in one area of the banking / lending industry, real estate financing. We have access to more lenders, more loan programs, different types of loans, and specialty “niche” products than a local bank. In most cases your local bank is probably a large regional or national bank with many branches and services available. You may get passed along to another department, or get lost in a phone system before you ever talk to a loan officer. While to your mortgage broker you are more than just a number, customer service is important to any mortgage broker. You generally only deal with one person who will help you through the process. Maybe the biggest advantage and least recognized by consumers is that mortgage brokers deal in wholesale rates, while your bank deals in retail rates. Not only can mortgage brokers “shop” your scenario around for you but they are doing it in wholesale side of the industry.

You may have heard of the phrase: "When banks compete, you win." This is true. By having a mortgage broker work with multiple lenders on your behalf, you are getting the lowest rates and you have a professional mortgage consultant to ask questions of.

In days past, borrowers felt comfortable submitting their loans to a local bank, feeling that doing business in the local community would be an advantage. These days, very little lending is done at the local level. The representatives at the local branch do nothing more than take the intial application (if that) and then send the loan to an originaton center, sometimes out of town or even out of state.

By contrast, a local mortgage broker is often more closely tied to the community and works on your loan from begining to end.

If you are undecided between a local bank and a mortgage broker, ask yourself if you are the type that dislike comparative shopping, or a procrastinator, or in a unique financial situation that is not apprehensible to most banks, a knowledgeable and competent broker may be a of great service. Even if you intend to shop for a mortgage on your own, you should always compare what mortgage brokers can offer.

Wholesale rate is the rate banks offer through mortgage brokers. The interest rate and points obtained through the use of a broker are almost always lower than one would get by going to a bank directly. Since brokers do most of the loan processing and pick up all the marketing costs, banks reason that they can afford to offer a lower rate as a way of passing to brokers what they save on overhead costs and advertisement expenses.

The uniqueness of loan programs available to Mortgage Brokers can save you thousands of dollars over a bank. Some of these programs would be for situations like low FICO scores, high DTI (debt to income ratios) and other detrimental factors affecting your credit and throwing you into a non-conforming loan scenario.

Your local bank is not as likely to take comepensating factors into consideration, when approving you for a loan. The Mortgage Broker, has several lenders that are willing to consider a loan applicant, even if they do have low FICO scores, or a high debt to income ratio. Some compensating factors that your mortgage broker may use to qualify you for a loan include: length of time at current residence (without having late payments), liquid assets, low LTV (Loan-to-Value), length at current job, and low payment shock (mortage payment not increasing drastically over your current rent payment). The mortgage broker can also use a good letter of explanation (LOX) to help an underwriter overlook any negative factors with your loan scenario. This combined with the mortgage broker having more programs available to them, could make the difference of being in your dream home, or not!

A mortgage broker often has a larger network of mortgage lenders so they can often find you the best deal. The more product knowledge you have when shopping for a mortgage, the more power you have to get the best deal.