Mortgage Companies…

…Banks Vs. Mortgage Brokers

More of the time than not the phrase "mortgage companies" is interchangeable with the phrase “mortgage lenders” even though it not a totally accurate description. The term mortgage lender is a broader term and includes a mortgage company as one of the mortgage lenders. Nevertheless, we will stick with the more common term of “mortgage companies”.

Mortgage Companies include:

Banks

Government Loans

Private Individuals

Mortgage Brokers

Credit Unions

Mortgage Corporations (or companies).

In this article I will talk about the differences among the above two major lenders, banks and mortgage brokers and see which one will suit your situation the best.

Banks

Many people will think of banks as the first place to go to for mortgage loans, but actually banks count for less than what you think.  Hence, they are not the main source of providing home loans. Mortgage corporations provide mortgage loans as their primary business and account for more than half of the total mortgage loans.

However, commercial banks are now competing more than ever with the other types of mortgage lenders in terms of providing competitive interest rates. Besides that, they are very convenient because of their locations which seem to be everywhere.

Another powerful factor that make banks competitive mortgage lenders is that many customers have had previous loans with their banks which make customers more comfortable dealing with something they are familiar with.  At the same time the bank can offer a faster and less costly application process since they have a customer’s information credit records and money accounts like, checking and saving accounts, in their data system.

Although most commercial banks offer mortgage loans to their customers, it is not their primary business, therefore, they may be more limited than other mortgage lenders who exclusively deal with mortgage loans. Again, before you commit to any bank, make sure you shop around and do a comparison among different type of lenders for the best deal you can get.

Mortgage Brokers

Mortgage brokers are real estate professionals that work as a “middle man” between the lender and the borrower. They specialize in finding the most suitable mortgage that the borrower’s profile can fit into by knowing a large network of mortgage lenders: and they deal with residential and as well as commercial mortgages.

It is less of a headache and more convenient to ask a mortgage broker to find you a good deal for your home mortgage; just be aware that you are paying for that service. So if you are trying to save money by acquiring a low interest mortgage then make sure whether the added broker’s expenses is worth it or not.       

Things to Be Aware Of

-Do not make any commitments by signing any contracts with a mortgage broker yet, rather ask several brokers to find the best deal in terms of interest rate, lenders expenses, and the broker’s fees.  

-The bigger amount the loan the more commission the broker makes so be sure you get what you need in the first place.

-Yield Spread Premium (YSP) is a charge paid by the lender to the broker which eventually raises the mortgage interest rate you are requesting. So ask if there is a YSP and what the percentage is. If it is too high, then maybe you should consider finding another broker or do it yourself.

-In every industry there are individuals who are not as honest as we all like to believe and the mortgage business is no different. Some brokers will not mind if a lender charges a higher interest rate on your mortgage so they can get a higher commission or fee from the lender while at the same time they are getting paid performing a service for you.

To guard yourself from being taken advantage of ask the mortgage broker to provide you with a Good Faith Estimate and Truth in Lending Disclosure as a component of the mortgage loan process.

 
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