Banks or brokers? Which to choose when applying for a mortgage

In applying for a mortgage, there is always the question of whether to go directly to a bank or to go through a broker. There could be advantages and drawbacks to either approach; the former could be faster and/or less expensive, but brokers can provide valuable assistance before and during the application process that make them a viable alternative. Ultimately, which of the two is the better option is based on the individual, and they should consider personal knowledge, experience, and preference when applying.

Firstly, going straight to a bank allows one to avoid paying a broker’s fee. Additionally, there may be an added level of trust associated with conducting negotiations directly. Assuming one has a high credit score, healthy income, and otherwise checks all of the boxes banks are looking for, it could prove to be faster than going through a broker. However, failing to do so might lead to one’s application being rejected out of hand. If an applicant is aware of such complicating factors, they should consider going to a broker instead.

If an applicant isn’t aware of how to fill out all the necessary paperwork, brokers can help point them in the right direction. They can further help in the negotiation process with banks. Reputable brokers are likely to have preestablished relationships with major lenders; they would thus be able to advise applicants on which institution would be likely to accept based on their unique circumstances.

Brokers can additionally ensure that their clients are able to get the best deals and lowest interest rates possible. This kind of information would be considerably more difficult for the applicant to find on their own, as they would have to go from bank to bank to do so. In this sense, brokers can act as single-stop information dispensaries, streamlining the process and making it much faster in some cases.

Lastly, if applicants are particularly busy, a broker can lessen their burden considerably, as they will handle negotiations and much of the paperwork.

With that said, broker’s fees are an additional expense that may need to be considered. Brokers are paid commission fees by banks but may additionally charge borrowers. It also must be mentioned that the interests of the broker might not always align with those of their clients; different lenders may pay the broker a different amount in commission, so said broker may be more inclined to secure loans with them instead of competitors.

Ultimately, as previously stated,  the better option is determined by one’s individual circumstances. If one has strong credit and an otherwise spotless application, they may do better to go straight to a bank. However, if one is unfamiliar with the mortgage process, has doubts about their eligibility and likelihood of acceptance, and/or is overly busy already, they should consider going through a broker.

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