Should I use a mortgage broker or bank?

Article by R. Joseph Ritter, Jr. CFP® EA

If you are buying a home or considering refinancing your current mortgage, a question you will likely face is whether to use a mortgage broker or deal directly with a lender, such as a bank.

My personal experience with banks is mixed in that some are willing to lend and offer competitive interest rates and terms. However, this is not true of all banks. Most smaller banks have strict qualification guidelines for borrowers and may not lend to just anyone, even if you have good credit and have been a loyal customer. Your local banker where you do business is certainly a good place to start, but don’t get your hopes up.

Trustworthy mortgage brokers have a clear advantage over your bank because they can often place loans with multiple lenders and can help you find the right loan for your situation. Interest rate, loan terms and duration of the loan can be somewhat more competitive than your local bank.

In recent years, however, there have been a number of high profile cases of mortgage broker fraud, robo-signers, falsifying appraisals, and instances of mortgage brokers acting unethically. Do your homework before choosing a mortgage broker. Mortgage brokers are regulated by state government. You can verify their license status, discipline, and complaint history by calling your state government offices or searching online with your state government to verify the information.

Check with your friends, Better Business Bureau and business associates to find a reputable mortgage broker. They are another source of confirming who is and is not reputable.

When you sit down to sign the loan papers, take a minute to review the essential terms to be sure the final documents agree with what you were promised. This is where having an attorney or a realtor with you can prove invaluable because they can help advocate for you if the papers are incorrect or do not reflect the terms initially disclosed to you.

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