Choosing between bank, broker for home loan
Ever wonder whether you should go to a mortgage broker or your bank when you’re looking for a home loan?
Following are some Q and A’s that might be helpful.
Q. Which might have more financing options, the broker or the bank?
A. Neither. Both the mortgage department of a bank and the broker tap the same secondary market capital sources, to which both have access. Some banks, however, retain nonconforming loans in portfolio, so there might be an option that’s not available to a broker.
Q. Will the bank’s terms be better?
A. Probably not. Since both broker and bank feed at the same capital trough pricing won’t vary much. Where both sources have flexibility is in the area of how much they make on a deal. If the origination entity is willing to make less, a borrower could benefit.
Q. Should I shop for rates?
A. Of course. On any given day, there will be small variations in the rate quoted by an origination source. And, you never know: somebody may have a marketing push featuring below-market rates.
Q. If price is close to the same, what should I look for in selecting a mortgage originator?
A. Service. Of course, that’s kind of hard to determine, before the fact. Which leads us to the next question:
Q. Which source might provide the best service?
A. The broker isn’t on a salary, but is paid a commission when the loan is funded. Thus, the broker is likely to have a fairly high level of motivation to see that funding happen, which can translate into superior customer service.
The bank loan originator is on a salary, probably with an additional bonus for funded loans. The salary can provide a certain comfort level that might dull the focus of the originator, although there’s certainly a motivational factor in doing a good job, so you can keep the job.
Q. If I don’t like the service, or how the transaction was handled, is one better than the other for my getting satisfaction?
A. A borrower can file a complaint with the Colorado Division of Real Estate, which oversees mortgage broker activities. This is a formalized process, and isn’t designed for many issues that a borrower might want to address. On the other hand, if you’re a customer of the bank as a depositor, or a borrower on other loans, you’ll get the ear of the bank’s management, and might well get some satisfaction.
Q. If I want a commercial real estate loan, or a loan on another nonresidential property, such as a lot or an acreage, which place is best.
A. Go to your bank. Most mortgage brokers don’t have sources for these loans, and the ones that do don’t do many. If your bank can’t, or won’t do the deal, ask them for a referral. There are a few brokers that specialize in finding financing for these properties.
Q. Is this a good time to get a new mortgage to refinance, or buy a home?
A. Yes. Interest rates are still very low. There is a wide variety of programs available for qualified borrowers. Before the crash, so called Yield Spread Premiums were paid to the loan originators. These are bonuses for negotiating a higher rate mortgage. Post Meltdown legislation mandates that these premiums be paid to borrowers,. From the borrower’s standpoint, there’s enormous flexibility in structuring a home loan. And, since the marginal originators have left the business, the remaining mortgage professionals, whether bank employee or broker, are very competent.
Q. Will I enjoy the application process?
A. Probably not.
Pat Dalrymple is a valley native. He’s been in the mortgage and banking business since 1961. He’ll be happy to answer your questions or hear your comments. His e-mail is firstname.lastname@example.org.
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