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Should you choose a mortgage broker or banker for my home loan?  That is the question.   I am going to focus on broker versus banker.

Mortgage brokers have many lenders/products and rates available to the customer where as the mortgage banker has one set of underwriting guidelines and rates. When you go to a mortgage broker, you have all the lenders available to you under that broker.  Further, the broker has to charge you a set price/rebate due to the new compensation rules set out by the Consumer Financial Protection Bureau where as the banker can move the rates and points on you.  Before this rule, the broker could charge you with points on the front and make money on the back.  Not anymore.  That changed the playing field with brokers and their customers. The following is a breakdown of broker versus banker.

Pros and Cons of Both:

Pros of working with a mortgage broker:

– They do all the legwork for you, working on your behalf with the lender
– They compare wholesale mortgage rates from a large number of banks and lenders all at once
– Wholesale interest rates can be lower than retail (bank branch) interest rates
– You get more loan options because they work with numerous banks and lenders
– Brokers can finance tougher deals because of their knowledge and various lending partners

Cons of Working with a mortgage broker:

– They make mistakes
– False promises to get your business
– Incompetence (poorly educated about the home loan process in some cases if newbies)
– May not have access to your underwriting programs for your specific loan

Pros of working directly with a bank:

– Might have an existing relationship which might help your loan get through
– You might know the banker handling your loan
– Bank might be more reputable than the shop you are going to.
– Lower interest rates in some cases
– If you existing loan is at the bank, underwriting might be little easier.

Cons of working with a bank:

– Conservative loan programs and overlays which you do not know nor will the bank tell you
– Do not disclose the yield-spread premium
– Lengthy process and tough to get a decision.  Better fit their underwriting box!!!
– False promises
– They make mistakes
– May overcharge you (commission doesn’t need to be disclosed)
– Incompetence (poorly educated about the home loan process in some cases if they’re just general bankers or customer service types).  Bankers are not required to take Federal and State test where as brokers are required by law.

Bottom line.  There are good and bad points for using either one.  You should shop around for both.  If you have any income or credit issues, you might want to consider the broker route.  Most banks want help you through these issues and provide good service due to their bureaucratic organization.