For a Mortgage Lender, Should you choose a Banker or a Broker?

Purchasing a home is arguably one of the largest most important financial transactions a person will make in their life. So, you might be surprised to hear that the Consumer Financial Protection Bureau estimates nearly half (47%) of consumers do not shop around for their home loan – they simply obtain their mortgage through whomever they speak with first. Though it can be a tedious process, taking the time to shop around for a mortgage can save you thousands of dollars over the course of your loan. That is why it is so important to speak with a mortgage broker: instead of being limited to offering one line of products (as a bank would be), brokers have access to many different loan options from a wide variety of lenders.

A broker will do the heavy lifting of finding you the best rates and loan programs to compare and, furthermore, cannot be compensated based on the terms of the loan itself. You can be confident that a mortgage broker will find you the loan program that is best for you – not the one that earns them the most commission. The commission structure for a broker is highly regulated and broker organizations have the same pay structure on all loans, no matter what type of loan or loan size. A loan officer at a bank is often under much more pressure to reach certain sales goals and can only work with the loan options and rates offered by their company.

Sometimes, consumers incorrectly assume that large retail lending institutions and banks will offer the best mortgage prices. In reality, brokers are not beholden to a bank’s overhead costs and can often obtain a lower interest rate through the same large lending institutions’ “wholesale” channel. Thomson Reuters estimates that mortgage brokers save their clients approximately one-quarter percent on their interest rate compared to bankers. Although a quarter of a percent doesn’t initially sound like much, that translates to over $13,000 in savings over the course of a 30-year $250,000 loan.

When you are shopping for a home loan – whether you are a first-time home buyer or a seasoned investor –it is important to work with an expert. Working with a broker ensures that you are using a licensed, bonded mortgage professional who has gone through extensive testing and continuing education. While a loan officer at a bank must register with the Nationwide Mortgage Licensing System (NMLS) and obtain an NMLS number, most banks do not require their loan officers to be licensed. One other factor to consider is that mortgage brokers specialize in one thing: mortgages. While it might seem obvious, when you work with a bank, you may not have the same luxury. Many larger banks also offer auto loans, personal loans, and a multitude of other options in addition to residential mortgages. Just as you would not go to a general practitioner for a knee surgery, when it comes to making a long-lasting financial decision, wouldn’t it be best to consult an expert who works in the field exclusively?

Leave a Comment