So you’ve just gone out and looked at approximately 285 houses, finally deciding on that perfect place. Now comes what’s arguably the hardest part of the home buying process, which is getting financing for the thing. Of course, you can just avoid this whole process completely by paying cash for the house, but who has a quarter million dollars just hanging around? And that’s just for a cheap place. Unless you’re planning on saving for a long time before buying that house, you’ll have to get a mortgage on it.
When it comes to getting a mortgage, there are two choices. You can either go to your local loans officer, who represents just the bank they work for. Or, alternatively, you can go with a mortgage broker, which is a liaison between you and a finance company. Which should you choose? It’s not such an easy question.
Advantages of Using a Banker
The big advantage to using your local banker is the fact that they have most of your info on file already, which speeds up the whole application process. When you go to a mortgage broker, they have to create a whole new application for your mortgage, since the lender they’ll submit to doesn’t know you from a hole in the ground.
Also, often your bank will have additional stuff on record. If your down payment is coming from your savings account, just a few taps on a keyboard can verify the money is there and has been there long enough to satisfy CMHC requirements. The bank can also take a quick look into your account to make sure your income is steady. A mortgage broker will ask a borrower to supply copies of these records, so a borrower saves time by sticking with his bank.
Also, if you’ve been a customer of that particular bank for a while, you might have fostered a relationship with the loans officer. Perhaps this is your 2nd or 3rd mortgage, and you’ve used the same girl for all of them, and she’s treated you well the whole time. You’re certain the rate being offered is as low as the bank will go, because you trust the loans officer. A good relationship with whoever handles your mortgage is essential.
Many mortgage brokers will tout the number of lenders they work with as a major advantage. The fact is, most brokers send all their AAA business to just one or two lenders, since they know those lenders so well. It kind of ruins the whole mantra of shopping your mortgage hard to get the best deal, doesn’t it?
Advantages of Using A Broker
Saying what I just said, the big advantage of using a mortgage broker is the ability to shop your deal to the best lender for your situation.
If you know you’re going to make large lump sum payments, then a lender who will let you do that without an interest penalty is ideal. Or, maybe you know you’re not going to pay down a nickel more than absolutely necessary, since you’re in no hurry to pay down your mortgage. If that’s the case, then you’ll want to go with a mortgage that has sacrifices prepayment privileges in exchange for a low rate. A good broker will ask these questions and find you a lender that fits your needs.
Another advantage to using a broker is flexibility. One of the reasons online banking has become popular is that people just don’t have time to go to the bank when it’s open. And it’s the same thing with arranging their mortgage. So, the broker comes to them, maybe after dinner or on a weekend, and starts the ball rolling on their deal then. What a great deal for those people who have to work during normal banker’s hours.
Banks are starting to eat away at this advantage though, introducing mobile mortgage people who will come to your house.
Which Should You Use
Well, that’s a tough call.
Using both a broker or a banker has merit. If you’re a disorganized person who hates a lot of paperwork, maybe using a broker isn’t the answer. Or, if you really have no idea about the whole process, maybe a mortgage broker is the route to go. Ultimately, the choice is up to you.
But, if you’re relatively astute financially, you might want to weigh out the options yourself and just approach the lender you like the most on your own. Mortgages aren’t that complicated, most everyone can understand the terms by educating themselves. Doing a little research beforehand will make either route easier.