Broker Vs. Bank Mortgage
People's ultimate goal when shopping for mortgages is to get the best terms and interest rates they can. You can find good deals at banks and through mortgage brokers, but each loan option can include pitfalls as well. Borrowers may find the best deals by shopping for a mortgage themselves.
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Underwriting Loans
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A loan officer evaluates borrowers' applications to determine whether they qualify to have their mortgage requests underwritten by the loan officer's bank. Mortgage brokers aren't involved with underwriting loans. They help borrowers find banks to underwrite their mortgages, but brokers handle the paperwork when a bank is found. A 2003 Bankrate article titled "Banker or Broker -- Which is Better for Your Mortgage?" notes that brokers may assert they offer potential home buyers more loan options than traditional banks, but banks have access to the same loans that brokers do. Yet, the Bankrate article says most people find better deals with mortgage brokers, and about 65 percent of mortgages are originated through brokers.
Broker Terms
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People who are shopping for a mortgage should do their own extensive search if they want the best terms and lowest costs available to them, according to broker Mike Stoffer. Mortgage brokers shouldn't be seen as personal mortgage shoppers because they work for themselves not consumers. Therefore, potential home buyers can't be sure how many mortgage offers brokers compare for their clients, which means a borrower isn't necessarily getting the best possible terms a broker can offer.
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High Rates
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Mortgage brokers usually have higher closing costs than banks, including higher application fees, according to Stoffer . You may not mind some higher costs if a broker can get you a better deal than you can get yourself. Still, banks have offered brokers more money to promote expensive mortgages with adjustable interest rates that rose rapidly and included prepayment penalties if borrowers refinanced to avoid the rising rates.
Considerations
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Shopping for a mortgage yourself can be simplified if you first decide what type of mortgage you want, such as a 30-year loan with a fixed interest rate. Fixed rates don't fluctuate like adjustable rates do. A 2008 U.S. Department of Housing and Urban Development study shows the benefits of shopping for a mortgage. The study examined 7,560 30-year, fixed-rate mortgages backed by the Federal Housing Administration that closed in the middle of 2001. Home buyers paid as much as $425 more in fees when they worked with a mortgage broker rather than going directly to a lender themselves.
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