The process of buying a home, whether you’re a repeat buyer or brand new one, can mean facing numerous questions you need answers to. One of the first questions you may face is whether you should work with a mortgage lender or a broker. It’s beneficial to understand the difference between these two and how a mortgage lender may be a better fit for your financial needs.
What is a Mortgage Lender?
A mortgage lender is simply a financial institution, such as a bank or credit union, that lends money directly to a borrower.
Mortgage lenders set their own requirements for who may qualify for a mortgage, such as a minimum credit score or maximum debt-to-income ratio, when offering select mortgage products.
When you start the process of working with a mortgage lender, you typically begin by discussing your goals and needs for a new mortgage. The lender will then recommend the type of mortgage that will be best suited to your unique situation. Once you’ve found the lender and mortgage type you’re most interested in, it’s time to obtain a prequalification letter.
Many borrowers choose to shop around and compare quotes from individual mortgage lenders, which helps ensure you’re getting the most favorable rates or lowest fees. When you work directly with multiple lenders to weigh your options, you’ll need to get prequalified from each institution.
What is a Mortgage Broker?
A mortgage broker gathers information such as interest rates, fees, and terms from multiple lenders and then presents you with the options. Typically, the broker has already reviewed your financial information and understands what type of mortgage you may prefer or have a better chance of qualifying for. The mortgage broker matches you to the home loan but does not actually issue the loan.
By using a mortgage broker, you fill out your financial information once upfront, and then it’s used for shopping around and comparing quotes. Additionally, a mortgage broker may know which mortgage lenders you are likely to qualify with in advance, possibly saving you some time.
Why a Mortgage Lender May Be a Better Solution for Homebuyers
Although using a mortgage broker may save some time, working directly with a mortgage lender offers many advantages to homebuyers as well.
First, mortgage lenders typically have greater control over the loan process, meaning lending decisions can be made faster, and there’s less room for miscommunication since there’s no middleman. Additionally, lenders may offer better rates or incentives for borrowers who work with them directly versus paying a commission to a broker.
Another advantage is the transparency of costs. When you work with a mortgage lender, you can clearly see the fees and terms associated with your loan. This level of clarity can be harder to achieve with a mortgage broker, who typically earns a commission from the lender for closing your loan.
Lastly, working directly with the lender means it’s less likely your loan servicer will change hands once you close on the loan.
Peoples National Bank of Kewanee employs experienced and knowledgeable mortgage lenders in-house, so you know you’re getting the best customer service and a loan that fits your needs. Talk to one of our mortgage lending professionals today to find out more.
