Banks vs Brokers

One of the most common questions that buyers have is about the difference between banks and brokers when choosing a mortgage lender. The simple fact is that it's really a personal opinion. When you go to a bank and get a conventional loan it isn't the bank's money they are lending you. This is money from a government agency either Fannie Mae or Freddie Mac. The bank is just the middleman lending their money and possibly servicing your loan on their behalf. The same concept would apply to FHA loans, VA Loans, USDA Loans, etc. Mortgage brokers work the same way. So what is the benefit of using a bank over a broker? The best way to explain this is with examples.

Example 1

Think of the process as building a new home. Would you hire a handyman that is an electrician by trade but occasionally does plumbing, flooring, electrical, drywall, framing, concrete, and everything else under the sun? Would you rather hire contractors that specialize in each trade that you know will deliver a great product? Getting a mortgage for your home is like building a new home. It is one of the biggest purchases in life and doing it right the first time might be the best approach. 

Example 2

It is Friday night and a new property pops up for sale that I have been interested in for a long time. I need preapproval immediately so I can go look at the home. I called my bank at 6:01 and uh oh no one is there. They close at 6.  Now what? It's simple, I hang up the phone and immediately call my Mortgage Broker and of course, he/she answers. Not only are they available they do the preapproval on the spot so I can go look at the home. Availability is one of the biggest factors when determining what mortgage lender to use.

Example 3

Bank (A) sells mortgages, checking accounts, car loans, CDs, insurance, and many other things. Is it possible to be the best at everything or even at any one thing when you are trying to tackle every product in the financial sector? 

Mortgage Broker (A) only specializes in mortgages. They live eat and breathe mortgages and everything they do is geared toward being the best mortgage lender. Do you think it's possible they might have a more efficient process in place?