If you are thinking about buying a home or you are planning to refinance your mortgage, you will need to decide where to get your mortgage. Wondering if you should get it from a broker vs a bank lender? What is the difference between the two, and which is better for your situation?
What Is a Mortgage Broker?
A mortgage broker (vs a bank) serves as a middleman between you and potential lenders. Rather than lending you the money themselves, they work with a variety of different banks and lenders to help you find a mortgage that fits your needs.
Here are the services a broker provides:
- Shopping around to find different mortgage options for you.
- Helping you compare interest rates and loan features.
- Assisting you in preparing your application and submitting it to the actual lender.
- Supporting you through the approval process.
Because mortgage brokers work with multiple lenders, they can often give you access to loan products and lenders you might not be able to find on your own. Working with a mortgage broker vs a bank can help you get the right mortgage product at a great rate, and without any extra research.
What Is a Bank Lender?
A bank lender (also called a mortgage banker) works for a single financial institution such as a national bank, a local credit union, or an online bank. If you work directly with a bank, you will only see their mortgage products and rates.
These are the services a bank lender provides:
- A comprehensive approach that links your mortgage with your other banking products.
- Personalized recommendations that take your entire financial situation into account.
- Online and ATM access adds convenience and minimizes processing delays.
- Ability to pay related homeowner bills, such as property taxes and utilities, using the same online app or in-branch.
Mortgage Broker Vs Bank Pros and Cons
Here is a summary of the pros and cons of using a mortgage broker vs a bank for your mortgage or mortgage refinancing:
Pros of Using a Mortgage Broker vs a Bank Lender
A mortgage broker can give you more loan options by comparing offers from multiple lenders. This can also help you find a lower rate. Mortgage brokers will typically guide you through the application and approval process, giving you more personalized service. Finally, a mortgage broker can identify lenders who are willing to work with you in circumstances such as self-employment or a low credit score.
Cons of Using a Mortgage Broker vs a Bank
Some mortgage brokers charge fees; be sure to ask about this before you start working with them. Working with a mortgage broker can also leave you with less control once the paperwork is out of your hands. Finally, not all lenders work with every mortgage broker; when you choose a specific mortgage broker, you could be missing out on some of the products that are out there.
Pros of Using a Bank vs a Broker
Getting your mortgage from a bank versus a broker has distinct advantages. First, bankers are intimately familiar with the products they carry, so you will get complete information and expert recommendations about their mortgages.
In addition, everything related to the mortgage, from the underwriting to the approval to the funding itself, stays in-house. That offers a level of security and privacy along with greater efficiency and accountability. If you already have a relationship with them, that also gives you a level of comfort you may not get with a mortgage broker.
Cons of Using a Bank vs a Broker
If you work with a bank vs a broker, you only get access to their products, so you may miss out on products that could be better for you and your circumstances. In addition, a banker’s role is to sell their products, and that does not stop at mortgages; you may wind up with a lot of information to sort through and add-on products that you may not need.
Mortgage Broker vs Bank Lender: Which One Is Right for You?
Choosing between a mortgage broker vs a bank is not one-size-fits-all and can come down to where you feel most comfortable. Here is a side-by-side comparison of your options:
| Mortgage Broker | Bank (Mortgage Banker) | |
| How They Work | Works with multiple lenders to find a loan that fits your needs. |
Offers only the mortgage products from their own financial institution. |
| Loan Options | Access to many lenders and loan types. |
Only offers in-house mortgage products. |
| Interest Rates | Can help find lower rates by comparing multiple offers. |
No rate shopping unless you do it yourself. |
| Fees | May charge a fee; always check before starting. |
Often, no broker fees; fees are built into bank products. |
| Application Process | Helps with applications and works with the lender on your behalf. |
Everything stays in-house from application to funding. |
| Customer Service | Personalized guidance throughout the mortgage process. |
Consistent communication with your bank representative. |
| Access to Lenders | Not all lenders work with brokers; could miss some deals. |
Limited to what the bank offers. |
| Approval Flexibility | Can help borrowers with unique situations (self-employed, lower credit, etc.). |
May have stricter approval criteria. |
| Bundled Services | Doesn’t connect to your banking or other financial products. |
Ability to link mortgage with bank accounts, pay bills, etc., in one place. |
| Control & Transparency | Some control is handed off once the loan goes to a lender. |
Full transparency with the lender handling everything directly. |
| Perks & Loyalty Benefits | Usually, there are no loyalty perks or discounts. |
Existing customers may get discounts or better terms. |
When making a decision, do not be afraid to ask questions and to read the fine print. A competent and professional mortgage provider will be happy to answer your questions and help you get the mortgage product that is best suited to your needs.
