When buying a new home or property, chances are you are going to need a mortgage. But with so many choices, how do you ensure you are choosing the right mortgage for you?
The first choice you will need to make is whether to use a bank or a mortgage broker. Then you will need to choose which individual service or institution to go with. Do some research; call around, and select the bank or broker that will best suit your individual needs. Although the individual lender you choose will do an in depth credit study on you, it behooves you to obtain your own credit report prior to speaking with the various lenders. This preliminary report can greatly assist them in making a preliminary determination of the various types of loans that may be available to you. This will most likely prove invaluable when it comes time to choose the person you will be working with to obtain financing for your new home or property.
A loan officer at a bank or credit union is an employee of that lending institution. This means they work with only one lender, the bank for whom they work. Oftentimes they have a wide variety of loan options available but all the loans originate from the bank or lending institution the loan officer represents.
The loan officer will take your credit application, and work with you to find the best mortgage loan to suit your needs, and will do everything they can to get your loan through the underwriters representing their bank or lending institution. You should expect your loan officer will stay with you to answer any questions or concerns you may have throughout the entire approval process.
A mortgage broker on the other hand has a plethora of lending institutions with which he or she works. They do not represent any one lender and essentially obtain your credit information and then try to sell you to an institution. Most often, they will submit your application to several lending institutions and select the approving lender based on the profit they will make form your loan.
Mortgage brokers are usually good at getting “higher risk” loans sold or approved, but as you may have guessed, the interest rate on these is usually not the best. When dealing with a mortgage broker, keep in mind, they are “selling” your loan to a lender and are paid based on the profit each loan will realize the lender.
Generally, when using a local lending institution like a bank or credit union, they are already aware of the local nuances that could affect the loan. Location of the property can dictate things such as heater BTUs, air conditioning system size and capacity, local septic system codes, the list can literally go on and on. A mortgage broker on the other hand may or may not be local to you and the property for which you are seeking financing. More often than not they are dealing with a lender who is nowhere near your market area. This could have a profound impact on the speed and efficiency at which your approval process proceeds.
Mortgage brokers can oftentimes find lenders to finance loans that were turned down by a bank due to credit issues, as well as commercial or exceptional properties.
You will probably want to choose your loan based on the best available rate. You will want to do some research, ask your friends who have recently purchased a new home or property, and discuss with your real estate agent their recommendations.