Buying a home is an extremely exciting — but sometimes overwhelming — experience. In addition to determining whether or not you can even afford a house in the first place, there are a lot of other things to consider: how high is your credit score (the median mortgage borrower had a credit score of 754 in 2017), how much can you spare for a downpayment, and should you depend on a bank or an independent mortgage broker to handle your home loans? When it comes to that last one, we figured we’d help out a little bit and compare the two for you.
Big Banks
Relying on a bank to manage your mortgage makes sense if you already have a strong relationship with that financial institution. For example, if you have a variety of deposit or loan accounts with a particular bank, they may offer you special deals and incentives that would be off-limits for someone coming in for the first time. In this case, your bank already knows that you’re a trustworthy client with capital available so they’ll be more likely to give you discounts or favorable interest rates.
If you’re applying for a jumbo loan (a loan that exceeds the limits for reselling mortgages to government-sponsored enterprises like Fannie Mae or Freddie Mac), you’ll also want to seek out a bank; your previous relationship will bolster such a high-risk investment. However, it’s entirely possible that your bank doesn’t have the best terms available in the market so an independent mortgage broker may be a better call.
Independent Mortgage Broker
Mortgage brokers have intimate knowledge about loans from a number of financial institutions. Since they help you shop around for your ideal mortgage rates, they’re extremely beneficial. They’re also well-versed in mortgage terms and are able to negotiate them on your behalf — this can make a confusing experience much easier to understand and get through.
Additionally, they’re able to sort through your financial history and find possible red flags that may cause the whole enterprise to come to a screeching halt at the most inconvenient time possible. If an independent mortgage broker is by your side, you can avoid that risk. However, some lenders don’t share their information with brokers; this means you could miss out on the best possible rate from a bank because you’re not working with them directly.
Both options are viable, so the choice really comes down to your personal needs. Compare where you’re at with the limitations and benefits listed above, and choose accordingly.
