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FDIC Not Ensured

Posted by  on Apr 16, 2009
 
The first step to searching for a home loan is deciding whether to get the money from mortgage brokers or the bank. Initially, the bank seems the safest way to go because they have done business with and handle the consumer’s money. Banks also provide business with people like managing checking and savings accounts. There is no seemingly urgent desire to try something new. However, there are some so daring to try the mortgage broker. While the broker does not handle accounts, they are known for getting better interest rates since they deal with more lending sources.

To understand the difference a little easier, it is important to know the loan process for each case. A banker is given a rate sheet that describes the choices of interest rates that can be quoted to their clients. This varies from client to client, and suits each specific case accordingly. This seems to work out well initially. However, down the line it is very limiting. A bank has no real option when it comes to interest rates, in that their priority is to remain profitable without losing business. They have a window of options, but close the door when it doesn’t suit them.

This is where it becomes beneficial to hire a mortgage broker. Unlike a bank, mortgage brokers are not loaning their own money and can therefore shop around. A bank has limited resources in that there are interest rates that will not benefit the institution. A mortgage broker, on the other hand, is not tied down to this type of institution. There are no bathrobes and curlers waving and nagging; they are free to roam. A broker can do all the dirty work, finding the best terms from the different lenders. This gives the borrower more confidence knowing there are more options. Since a mortgage broker has many sources to work with, it is easier for them to find a loan at a lower rate than most banks.

Mortgage brokers make the lending decision and fund the loan with their own money. As a borrower, it is more than luck of the draw as it would be with a banker. For the borrower, it becomes a convenient only having to worry about one broker rather than a fleeting army of bankers. The borrower is dealing with the broker who is funding the loan, and leaves the broker to deal with the lender. The mortgage broker is able to choose from more choices, which means a lower interest rate for the borrower, which means more furniture for the living room.

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