When it comes to purchasing a home in Austin, Boston, or anywhere else in the country, buyers have two primary loan sources to select from: a mortgage broker or a bank. Since both options have pros and cons to consider, it is important to learn more about each one in order to determine which option is your best choice. To that end, here is a look at the pros and cons of mortgage brokers vs. bank loans.
Pros and Cons of Working with a Mortgage Broker
When working with a mortgage broker, you are working with someone who purchases loans from a variety of different mortgage lenders before selling them to another mortgage banker for a profit. Since mortgage brokers work with a variety of different lenders, they can often offer better rates to their clients than the typical bank. On the other hand, mortgage brokers do work on a commission and regularly charge extra fees that are not included with bank loans.
Perhaps the biggest benefit to working with a mortgage broker is that a mortgage broker can often get a loan for those who may otherwise have difficulty getting one. As such, working with a mortgage broker is a good option if you meet one of these criteria:
- You are self-employed
- You have less-than-perfect credit
- You recently started a new job
- You are carrying a high debt load
If none of these sound familiar, it may be in your best interest to obtain a loan through a bank.
Pros and Cons of Getting a Bank Loan
When obtaining a loan through a bank, you are typically getting a loan from a bank that is lending out its own money. The bank makes a profit as it collects the loan fees and interest from the customer. It is important to note, however, that your lender may change to a different bank over time. This is because most banks package their loans in bundles of $1,000,000 or more and then sell them to a secondary market in order to make a commission.
While there is a chance that your bank will sell your loan to the secondary market, obtaining a bank loan is generally a safe and easy bet for those in need of a mortgage loan. In general, bank loans are less costly upfront than loans obtained from a mortgage banker because there are not as many add-on fees. Furthermore, because banks do such a large amount of business, they are capable of cuttings costs and passing those savings on to their customers.
For those with bad credit, obtaining a bank loan may be difficult. This is because banks only give loans to those with good credit, a steady income and demonstrated job stability. While this is a downside for those with poor credit, the careful screening process helps banks keep the costs low for those with good credit. In addition, because bank loan officers usually do not receive a commission, they generally do not try to push customers to purchase expensive add-ons. Mortgage brokers, on the other hand, make more money if they are able to convince you to include additional items on your loan.
Keith Munsell 
