It used to be that anyone applying for a mortgage would go through one of a handful of major banks. These banks hired loan officers who would use one of the mortgage programs developed by the bank to get the home buyer the money they needed for the purchase.
Today, the mortgage market has become more competitive, with a huge number of mortgage options to choose from. Fledgling companies, speculators, and private individuals have all realized the financial opportunities to be gained through loaning money for mortgages. As a result, mortgage brokers are becoming more visible.
A mortgage broker is a freelance agent. As opposed to the bank employee, who will only provide a mortgage that originates with the bank, a broker has the option of a very wide range of programs. It is her or his job to find the best rate possible for the client based on the client’s terms.
The choice of using a bank or a mortgage broker depends on your individual situation. For example, banks tend to have very strict guidelines when it comes to approving individuals who may not have the best credit. Individuals who have been bankrupt through a failed business or have other credit problems may be turned down by a bank. A mortgage broker, on the other hand, will usually be able to locate a mortgage lender who does not mind a bad credit rating. As always, of course, such a loan will mean a higher down payment and higher interest rates.
That is one situation where a mortgage broker may be beneficial, the other of course being the access to a wide range of mortgage plans, some of which are much more favourable to the home owner than traditional bank mortgages. On the other hand, there is a lot to be said for going through a bank.
A mortgage broker, although operating under governmental guidelines dictated by provinces (in Canada) is an individual, and that means some research will have to be done in order to ensure that you are receiving the best service. Banks of course have national reputations at stake and are unlikely to have any major skeletons in their closets, outside of the fact that they are pirates.
Banks also have the advantage of understanding local conditions; mortgage brokers usually will, but they may hook you up with a mortgage lender who is based far away and has less of a grasp on local conditions. This may affect the loan, but in most cases the mortgage brokers will have a grasp of local conditions and find a plan to work accordingly.
The decision to go with a bank or a broker for a mortgage will depend on the situation of the individual. If you like the idea of going outside the bank system and hunting for the best mortgage deal for you, a mortgage broker may be a good choice. If you like the straightforward, traditional approach, go through the loan officer at your bank.