Depending on the type of home loan you are looking for, you could save yourself thousands of dollars by shopping various lenders for your home mortgage needs. Therefore it is imperative that you know the difference between a mortgage broker and a bank lender. The main differences among the two are that mortgage brokers act as a liaison between the home buyer and the lenders. Where as banks will only offer their specific loan products.
Below are the reasons why you should use a mortgage broker instead of a bank:
First of all Mortgage brokers are commission based, so it is in their best interest to get you the best rate possible, or they don’t get paid. And their compensation is fixed with a lender so they no longer can get paid higher commissions for directing you to riskier loan products.
They have an exceptionally large network of lenders that they work with to get you the most favorable mortgage rates and terms. Put it this way, the more lenders you have competing for your home loan, the more you save.
Mortgage brokers are able to work one-on-one with each individual client, evaluate their specific needs and find lenders with the relevant loan products. Next, the broker submits the request to one or more lenders and when the request is accepted the broker works closely with the lender until the home loan closes.
Correspondent lenders who the broker works with to fund your loan will then sell those loans to the big banks but the reason why they offer lower rates is because it saves them overhead of generating the loan themselves.
The licensing requirements are far more stringent with loan brokers than retail bank loan officers. The bar is set higher so the broker has learned more vs. the bank loan officers.