Banks vs. Mortgage Brokers
If you plan on purchasing a new home, more than likely you will be looking to obtain a mortgage (unless of course you are a big wig and can pay cash) to finance the purchase of your home. Before obtaining this mortgage, many people go into the process not understanding the difference between a mortgage broker and a bank loan officer.
I will attempt to shed some light on the issue.
Bank Loan Officers
If you go into a bank, credit union or other such lending institution and work with a loan officer, understand this; that officer is an employee of the lending institution and their sole objective is to sell and process mortgages and other loans initiated by their employer (the institution). These loan officers often have a surplus of loan types to choose from, but every single loan starts out from one lending institution.
After your loan application is taken by the loan officer, he or she will work to find a suitable home loan for you. Should your personal credit be acceptable, the loan officer will begin to process the purchase. If there are issues with your credit, the officer will advise on steps you can take to clean up your credit, thus putting you in a position for approval in the future.
Mortgage brokers connect lenders with borrowers and are paid a fee to do so. As freelance agents, as opposed to employees, they typically work with dozens or even hundreds of lenders.
Think of mortgage brokers as scouts or sniffers. They find home buyers; evaluate their situation, and analyzing their credit condition to determine which lender is the best fit for that person’s needs. After evaluating all the necessary criteria, the broker submits the home buyer’s application to one or more lenders in order to sell it. Once a lender is identified, the mortgage broker will work with said lender until the loan closes. A mortgage broker worth his or her salt can find a lender for just about any type of credit condition.
Bear in mind that for his or her work in securing your loan, the mortgage broker will earn a fee for the transaction. The sweeter the deal they are able to obtain for the lender, the more money they are paid so they are quite eager. Let the mortgage broker convey to you the terms they will be able to secure for you and do not be so anxious to disclose to them the interest rate you are seeking or willing to accept. I recommend shopping around with three to four different lenders to find the most reasonable terms acceptable to you.
The majority of the mortgages companies that advertise on the internet are mortgage brokers.
What Does All This Mean to Me?
Because of the nature of their business, mortgage brokers, both local and online, may find you a lender in another part of the country. Understand that an online bank might not have a local office where employees can help you one-on-one.
There may be incongruence with how one lender classifies or understands something in one state as opposed to another. The online or out of town lender may not, for instance, understand the types of heating or cooling systems used in specific areas. They may not be familiar with private septic systems, nor know the difference between the various types used in a specific locale. They also may not directly understand common classifications and terms used by local appraisers. The examples above are just a few of the problems that can cause significant slow-downs in loans made by an out of town lender working with a mortgage broker.
On the flip side, using a local bank can sometimes be a plus because their employees generally understand the specifics of local properties and help move towards an expedited closing. A distant lender who doesn’t understand the intricacies of local real estate will more than likely delay closing until their questions are answered.
However, mortgage brokers will often find a lender who can make those difficult loans that a bank will outright refuse. Case in point is problem credit. Mortgage brokers might also be able to more easily secure unique or commercial property loans.
Nine times out of ten you should make your choice of a lender based on the best loan terms you can find. Always ask questions about the expected time-frame it will take to close your loan. And ask your real estate consultant, friends, colleagues, etc. who have recently bought a home for a referral of a lender or broker.
Pull Your Own Credit Reports
It is always a good idea to know your credit standing before starting the mortgage search process. You should order your credit reports and scores from all three major credit reporting agencies before visiting a bank or broker. The U.S. government entitles every person to a free credit report from each credit bureau once a year. You can go to AnnualCreditReport.com to obtain your free reports. A personal copy of current reports should provide enough details for a lender to give you a good idea of the types of loans they can offer you.
The lender you decide to use will access your full credit files with their accompanying score before presenting you a hard offer. This does not mean you should not take your personal copies with you to the initial interview because this will avoid your credit being pulled multiple times, which can lower your scores. Requesting your own credit reports does not affect your scores. Also having your reports pulled by numerous companies in the same industry (i.e. car, banking, furniture) and within a certain timeframe (usually 2 weeks) does not affect your score as much either.
————————Thoughts on My Daughter and Son ————————-
Attachment is a very funny thing. When my son was just a few months old, we used to prop him up in his bassinet against a soft, stuffed, toy kitten. As he grew he became fond of anything that had the same texture as that kitten; blankets, clothing, you name it. Even now as he is well into crawling, he will locate that kitten on the floor and scuttle over to it and, while still on his knees, lie his face down on the kitten for a few minutes. It so amazing how we get attached to things and this attachment can’t be seen any clearer than in a little child.