The Mortgage Broker vs. The Bank
Minneapolis, MN: When you are considering financing a home, you will have the choice to work with either a non-bank mortgage lender or a bank. Non-bank lenders encompass many people, from a traditional mortgage broker, to correspondent lenders (think super broker), or direct lenders who are not banks.
Most potential home buyers think everyone who isn’t a bank is a broker. While it is more complicated than that, for sake of this article, I’ll call everyone not a bank a broker.
Full disclosure. I work for a correspondent lender. We originate, underwrite, fund and close our own loans, then sell them to large servicers (typically a big bank) after closing.
Here are a few distinct pros and cons of working with a bank or a broker.
- Mortgage Brokers generally have lower operating costs and less overhead (hence the whole concept of broker to begin with)
- Mortgage Brokers generally have significantly more loan options as they provide the products of many lenders
- Mortgage Brokers generally are more knowledgeable and experienced. The Loan Officers at non-depository lenders (brokers) must be individually licensed, pass state and federal tests, and complete continuing education each year. Loan Officers working for a bank or credit union do not.
- Mortgage Brokers generally work 100% by commission, and need to deliver 100% satisfaction to our clients.
- Generally speaking, you work directly with your Loan Officer, and no one else to get through the maze of loan options, paperwork, etc.
- Banks are convenient because they often have many locations.
- Banks have higher overhead. All those brick and mortar locations, and paying for stadium naming rights gets pass on to you.
- Banks only offer their own products. They may not offer what you need.
- Banks will cross sell you on all their other products.
- Generally speaking, at banks, your Loan Officer is more typically a low level application clerk, vs. a true mortgage professional. You will generally be passed along to many people during the process.
Those are just 10 factors to consider, obviously there are many more ways to compare. But if I was doing my largest financial transaction of my life, I’d want an experienced person, with the largest amount of loan options, and with the least overhead, so I get the best possible deal – and that is almost never at a bank.