Mortgage Banker vs. Mortgage Broker
The list of mortgage products and sources for loans in today’s marketplace can seem endless. In spite of several Lenders, including some prominent banks, leaving the marketplace, there is still a plethora of products and lending sources for the mortgage consumer. The question then arises: Should I go with my bank or try to use a mortgage broker for my next mortgage?
In the United States, the majority of mortgages are transacted by brokers. In Canada, the numbers are much lower, with 34% of the market share going to brokers in 2007, according to recent surveys. This has risen dramatically over past years and there are several reasons for this. Regardless of locale, a number of advantages exist when using a mortgage broker.
When applying for a mortgage at your local bank, you are relegated to the products that that particular bank carries. If your loan scenario does not fit any of these products, a bank can sometimes use a special branch to negotiate the loan, for less than perfect credit, for example. Mortgage brokers, on the other hand, can shop a mortgage application around to a host of lenders and often can find a slightly lower rate because of this. It has been stated by a few that the products a bank has are the same a mortgage broker has access to and so the rates, terms, etc., are the same. This simply is not the case, for the reason stated above. There are just too many lenders with a myriad of products. Also, at any given time, it seems, one or more particular lender(s) will have a special rate or term on one or more products to attract consumers. So, one can usually find a slight advantage because of the extra choices available to brokers.
Investors with rental properties can find difficulty obtaining mortgages with their bank, even with perfect credit. The reason is that, often, banks’ lending criteria do not allow them to offer more than 3 or 4 mortgages for rental properties to a client. This is a big consideration for investors shopping for a mortgage. A broker, however, can just submit the mortgage request to another lender, eliminating this problem. Also, many private institutional lenders do not have this restriction for rental properties.
Although lending criteria has tightened and many private lenders have left the market, if you have bruised or imperfect credit, brokers can provide you with more options, including access to private lenders. Indeed, sometimes brokers are the only option in such circumstances.
Mortgage brokers specialize in one field: mortgages. Bankers, conversely, must have adequate general knowledge in a variety of areas, including mortgages. Hence, they may not have the experience, contacts, and knowledge of the market that a seasoned mortgage broker has. This is due to the fact that brokers deal with lenders daily and they study rates and the latest products continually and know what’s out there.
By using a mortgage broker you can usually save time and energy. During the time it takes to set up an appointment with a bank, a broker can shop your mortgage around to several different lenders. And, if there are any negotiations to do, they can do them for you, unlike having to negotiate for yourself at the bank. Brokers also have no allegiance to any particular bank so they’re advice tends to be unbiased.
In the United States, there are regulations which govern bankers and mortgage transactions. There are also licensing requirements, to a greater or lesser degree depending on which state, for mortgage brokers. Members of a national brokers association are required to take continuing education in order to maintain certain professional designations in the brokering industry.
In Canada, regulations also exist for banks, however there are no licencing requirements for bankers transacting mortgages. On the other hand, mortgage brokers in Canada are all subject to strict licensing requirements (as of July 1st, 2008). Brokers must also take continuing education in order to maintain certain professional designations in their industry.
In the end which should you choose? The answer is: if the product is right for you and you can get what you are promised with the best rate, then it does not matter where your mortgage money comes from. There are credible and experienced mortgage professionals in both banks and brokerages. Shop around, talk to friends and relatives. Make sure that the professional is licensed if that is required and what experience and reputation they have in the industry. Are they members of professional organizations? These organizations will often have a standard for ethics and business practices which apply to any member. Check with the Better Business Bureau to see if there are any complaints lodged against the broker or banker. With this common sense approach, you’ll be in a position to make a strong choice when it comes time to getting your next mortgage. And with rates dropping the way they have been, the time may be right to start shopping now.
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