Home Purchase: Use a Bank, Mortgage Lender or Mortgage Broker?

Home buyers have several options for mortgage loan financing. Where you should get your purchase mortgage loan depends on what type of loan program you need, the amount of your mortgage loan and how qualified you are.

There are three types of companies where borrowers can get a mortgage: banks, mortgage lenders and mortgage brokers. Banks and mortgage lenders make loans directly to borrowers, while mortgage brokers place your loan with banks and mortgage brokers on a wholesale basis. Sometimes, mortgage brokers place loans with mortgage lenders who in turn sell their loans to banks.

While you might think that going direct to a bank and cutting out the mortgage broker and mortgage lender would result in a better deal for you as a borrower, you would usually be wrong. The odd economics of the mortgage business are such that it is often less expensive to get your mortgage through a mortgage broker or mortgage lender than directly from a bank. This is due to the fact that mortgage brokers and mortgage lenders are more efficient at originating, processing and closing your loan than most banks, so when banks have to do those functions themselves they charge more because it costs them more.

The Mortgage Loan Process

No matter where you get your mortgage loan, however, the basic process and people you work with is essentially the same. You will normally be assigned to a mortgage loan officer (note: over the next year, all mortgage loan officers who work with borrowers will have to be licensed individually). That mortgage loan officer will take your application, pre-qualify and often pre-approve you for your loan, help you select the right mortgage program for your needs and then help you lock in the best rate available that they offer.

Once the mortgage loan officer has completed his or her functions, your loan will be placed with a loan processor who will collect all documentation from you, send you disclosures to sign, order appraisal and title reports and finally prepare your loan for underwriting and final approval. An underwriter then gives final approval to your loan and a closing coordinator prepares your loan documents and funds for your closing.

Select the best team

For a home purchase mortgage, choosing the best loan officer-processor-underwriter-closer team is just as important as the type of mortgage provider you select to make sure that your loan is approved by your mortgage contingency date and to also insure that you close on your purchase on time. There is nothing more frustrating than buyers and sellers waiting around for days after an expected closing with belongings on the moving truck waiting for the closing to occur. The same rules apply whether working with an on-line lender or a local lender.

Deciding on the best mortgage source for your needs depends on the following three factors:

1. What type of loan do you need? Not all lenders and brokers offer every type of mortgage loan. For example, many lenders and brokers do not offer the popular FHA mortgage loan program which allows a 3.5% down payment. Also, only certain lenders offer VA loans, USDA rural housing loans and other types of specialty products.
2. What loan amount do you need? Mortgage loans are usually either conforming Fannie Mae, Freddie Mac or FHA loans up to certain loan limits or they are considered jumbo loans. To further complicate matters, all three agencies now offer some jumbo loans. If you need a jumbo loan amount you will be limited to the few lenders in today's market offering jumbo mortgages.
3. How qualified are you? If you are perfectly qualified for your purchase mortgage loan, then your primary concern is probably getting the lowest mortgage rate available. Mortgage brokers can shop for the best rate for you, but you will also be able to get a loan at any type of mortgage provider. On the other hand, if you are on the edge of qualifying for the mortgage you need, a mortgage broker who can find the program you need or a mortgage lender with the ability to manually underwrite and approve your loan is probably a better option than a bank which tends to make fewer exceptions.

No matter where you go for your mortgage, shop around first, make sure they can offer the program you need and get everything in writing once you apply and lock in your rate.

For an exact mortgage rate quote and a free purchase mortgage pre-approval from Total Mortgage - a licensed mortgage lender and mortgage broker, complete a free rate quote request now!.