If you've never bought a home before, you may not know there's a difference in mortgage lenders. I'm not just talking about between companies, but the types of lenders. Most people know their banks have mortgage lenders they can walk in and see. But there's also mortgage brokers, who are just a bit different in some ways than the bank lenders. So which one is right for you? Let's take a look at the differences (and similarities) to them.
Bank lenders are, as you guessed it, the mortgage lenders who work for a bank. Walk into any Chase, Wells Fargo, Bank of America, and you'll probably find one or two in the branch. Most people will go to the bank with which they have accounts in place. This can be an effective way to streamline your information as a lot of it will already be in the system, such as your bank statements and financial info. You also know exactly where to find them if you have any questions, although one mortgage lender can cover five different branches at one time.
The downside to a bank lender is they can only sell you the products and rates their particular bank offers. While all lenders offer the traditional FHA, VA, and Conventional loans, they may not offer any specialized programs you may be able to take advantage of. Some offer USDA loans, others may have a portfolio product, but for the most part they only have the big 3 loans. Also, thanks to new CFPB laws, the big banks are taking double the normal amount of time to close than they used to. This means it could take 60 days to close on a home with a bank. If you're competing with multiple offers, a 60 days close will immediately get your offer tossed out, even if the other terms are the best. They also tend to outsource every file to another part of the country for servicing. So the file your lender is working on in the branch, is being underwritten somewhere else. This takes time, and can often result in delays and a breakdown in communication.
Mortgage brokers are lenders who can service your loan and shop it around for the best rate possible. They tend to do a lot of the initial work upfront and keep all the files in-house instead of outsourcing them. This leads to much faster turnaround and closing times, which are ideal in the hot real estate markets. I've seen a mortgage broker do a loan in as little as 11 days when pressed. Brokers also have a lot more lending options when it comes to products and programs. This includes programs for the self employed, first time buyer, lower credit score, and more. Plus, as mentioned, they compare rates from not only all the banks, but wholesale lenders as well to make sure you're getting the best possible option.
The potential downside to a mortgage broker is you may run into a so-called 'internet lender' and have more trouble than anything else. If you've done any research online, you've probably seen quotes online for sub-3% interest rates with incredibly fine print that make you feel all warm and fuzzy inside...or apply for a mortgage in your boxers. They are mortgage brokers as well, but be very careful with internet lenders. Those sites are lead regeneration sources and sell your lead to another lender. Always try to stay with someone local, as they can get a local appraiser and tend to have more knowledge of the area you're trying to buy in than an out of state internet lender.
Certified Mortgage Planner
There's also a level of mortgage lender called 'Certified Mortgage Planner'. In my opinion, they are the best people in the mortgage industry, as they not only look at your mortgage, but help you with your entire financial picture in the process. They look at your whole picture, such as how to help borrowers reduce debt, improve cash flow and identify mortgage planning opportunities around retirement planning, college funding, elder care, and other life events. The Mortgage Nerd is probably the best Certified Mortgage Planner to get information from, and her YouTube Channel is definitely worth subscribing to.
So if you're in the market to buy a home, Contact Me Today! I can help you get set up with mortgage and insurance people to make sure you're able to buy a home and have the best coverage.
You can also get a copy of my Home Buyers Handbook when buying to learn about the process!