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There are important differences between a mortgage broker and a bank. Understanding the difference can help you choose which entity to use for your next home purchase or refinance. Mortgage Broker: Representing Multiple Products A mortgage broker has business relations with several different lenders. The lenders publish guidelines about the loans that they will offer. The guidelines will cover acceptable credit score, minimum and maximum loan amounts, interest rates and private mortgage insurance rates. The broker is able to offer these various products to their clients. The money used for mortgages, whether they are purchase transactions, refinance, 2nd mortgages or reverse mortgages, comes from the lender, not the broker. Bank: Represents Themselves Banks will usually have their own line of mortgages that they can offer. These loans can range from common 3 to 5 year ARMS up to 15 and 30 year fixed loans. Some banks may sell their mortgages to warehouse lenders, but that is not the norm. Banks have their own guidelines and rules for eligibility. Many banks may also offer conventional loans via Freddie Mac, Fannie Mae and government loans from FHA and VA. Payments to the Lender or the Bank When it comes time to make the monthly payment, the difference is more noticeable. If your loan came from a mortgage broker then you will likely receive a notice in the mail advising you to send your loan payment to a particular address. It is possible that the lender that owns your loan will change more than a few times over the life of the loan. It is just the opposite with a bank. If you get a mortgage with a bank then that is where you will make your payment. The bank may have a central processing office where they ask you to mail the payment for your convenience, but most likely you will still have the option of making the payment at the local branch. Flexibility is with the Broker Since the broker has many relations with many lenders they have more flexibility in offering rates, terms and even closing fees. This gives the broker a wider range of products to offer and the likelihood that they can meet the needs of a broader audience. Consider this example. A buyer can choose to work with a real estate agent that only shows homes that they are working for as the listing agent. Or, a buyer can choose to work with a real estate agent that will show any home currently for sale in the market by any agent. In the first example it is possible that the agent has enough homes listed for sale that would meet the needs of a lot of potential buyers. But the second agent, the one that can show any home in town, will have a much easier time meeting their buyer with just the right home. Author has years of experience in real estate and mortgage industry and have been serving Albuquerque area mortgage clients for over 12 years. If you living in Albuquerque and have any question about Home Refinance or Albuquerque Home Loan then call us at Call us at (505) 830-9685
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