Banks vs. credit unions vs. mortgage brokers
When you apply for a mortgage, you are most likely going to apply with one of these three types of mortgage lenders – banks, credit unions, and mortgage brokers. Each of the three are different from the others in some important ways.
All 3, banks, credit unions and mortgage brokers have their pros and cons.
If you think you are going to use a bank or a credit union because you have
heard horror stories about mortgage brokers in the past, think again. All 3
have their share of problems, complaints, lawsuits, predatory lending cases
against, and so on. When 100 small mortgage companies/mortgage brokers
throughout the country get in trouble for predatory lending practices and 1
large bank gets into trouble for predatory lending who do you think the
press and media are going to point fingers at. Even though the total damages
between the 100 small mortgage companies is only around 1 million dollars
and the large bank is being sued for 500 million dollars??? Of course it is
easier to make a story out of the 100 versus the one large bank, even though
the large bank has many more lawsuits and it being sued by way more people
and way more money. Therefore, all types of mortgage companies have their
share of problems so don't let that entirely determine who you choose to
work with for a mortgage .
A bank has only one set of underwriting guidelines and only as many home loan programs as they offer. With a bank you are either approved, declined or counter-offered on your mortgage application with them, unlike a mortgage broker who can send your loan to another lender if you are turned down/declined or not approved how you want to be approved.
A mortgage broker will have access to several lenders, who each have different mortgage programs. One of these programs could be the perfect fit for your financial situation. Also, unlike many banks and credit unions, a mortgage broker can offer Stated Income, No Ratio, No Doc, Pay Option ARMs, and several other mortgage programs.
Some borrowers have the misconception that mortgage brokers are middle-men. These borrowers falsely belive that they can save money by dealing directly with the banks or credit unions. The reality is that mortgage brokers usually offer better loan programs with lower rates, because loan brokers work with many lending institutions to find the best deal for the borrower. A bank or a credit union is just one of many lending institutions.
Mortgage brokers also have access to wholesale rates, which in turn is passed along to the borrower. They also have acces to lenders who do not have a retail side, which allows the borrower more financing options
Neighborhood retail banks usually offer only a few loan programs. If they do not have a perfect loan program for an applicant with a particular situation, rather than sending the applicant to another bank with the right mortgage program, bank loan officers would sell the next best loan that the bank has to offer, which may not be a good loan for the applicant at all.
One other major difference is that mortgage brokers must disclose all of their compensation to their borrowers. This includes any monies paid to them by the investor. Banks do not have this requirement.
Local banks and credit unions often offer attractive financing terms for Home Equity Lines of Credit. If you have a good relationship with a local bank or credit union and are in the market for a HELOC ask if you qualify for any special promotions.
If your credit is not very good, applying at bank after bank is a bad idea. Each of these institutions will have to pull your credit and analyze it. If you don't fit into one of their restrictive programs, they will simply turn you down and send you away empty-handed. A mortgage broker, on the other hand, will pull your credit once, and then begin his search for the best lending institution for your particular needs. You are much better off finding a mortgage broker you can trust and letting him work for you.
If you have any questions regarding our products, you can contact
us by calling or e-mailing us and we'll get back to you
as soon as possible. Thanks!
Information listed above is to be used for educational purposes only and is not guaranteed
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