Are Mortgage Brokers Really Necessary? | Mortgage

by ShakiraSimone

You are going to buy a house. You know that you will need a loan. There are so many choices to look at. Do you look into mortgage brokers? Do you go directly to your bank? Which is the best option? What should you do?

Broker or bank?

It may be hard to choose between a mortgage broker and your bank. Both have advantages and disadvantages.

Choosing a mortgage broker

Your mortgage broker will take care of just about everything for you. You will have little to do or worry about. Your broker will take your necessary information and look for loans. There are a lot of loan possibilities with a broker. You may not have good credit. Your broker can take that into consideration and find you a loan. This could be your only chance in some cases. Your broker is not limited to one lending institution. Banks, savings and loans, and government agencies are all available. This give you better chances to get a loan.

You may be able to get a lower interest rate for your home loan. The broker can deal with your bank, also. Banks often offer retail interest rates. The broker can offer you wholesale interest rates.

A mortgage broker may be on a more personal level. Some banks may seem a bit stuffy. You may feel like they are doing you a big favor, to give you loan. In reality, that is how they stay in business. A broker may tell you to call him or her any time. It may be more like person to person as opposed to person to institution.

Brokers might be able to get you a no down payment deal. There also might be very low down payment deals and situations. Banks will not do that. They have set amounts for their down payments. If you do not have enough, you have to look elsewhere.

Your broker will inform you of the yield spread premium. It is called the YSP. The YSP is a very important loan factor to know. Both bank and brokers earn commissions this way. Lenders issue loans for wholes interest rates. Brokers and banks get a commission for selling you a retail interest rate. Brokers will commonly use part of their commission to discount or pay for your closing costs. They may not always do that. This is why the YSP is so important. It tells you what they are making. Banks do not have to inform you of the YSP as brokers do.

Your bank as a loan source

If you have been a good customer with your bank you may qualify for special deals. They will already know your personal situation. It is possible that a mortgage broker will be shady or dishonest. Banks are more out in the open and subject to scrutiny. You may be able to get a better rate with your bank. This is especially true if your credit is good. You can have your mortgage payment automatically taken out with a bank also.

In closing

Banks offer some good deals. Mortgage brokers also have fine offers. Your situation will dictate which is best. At times, they both will be a good option.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

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