Information on Mortgage Brokers Vs Banks

Getting a pre-approved mortgage is a significant step while purchasing a property.

You need the funds to complete the transaction, and this will not occur until you find a top-tier bank (lender) or mortgage broker. For those who are looking to choose a direction, it’s time to consider the pros and cons of each option.

Banks

Pros

1) Straight From The Source

Banks, like Wells Fargo, are ideal for those who want to do the negotiating on their own terms without anyone getting in the way. This is better for those who have been through this in the past or have a long history with a particular bank. It’s easier to get a good deal when you have that established relationship.

However, this is something that’s best suited for those who know what they’re doing and have the patience to adapt.

Those who don’t might end up in a situation where they get duped and left with a horrible loan.

2) No Fee For Broker

The broker is going to charge a fee, and that’s something you don’t have to deal with while doing it on your own. If you go to the bank, they’re going to deal with you and no one else. This means you’re cutting out the middleman and that is a good option for those who know what they’re doing.

Money saved can go a long way in increasing your down payment or saving it up for an emergency fund. This is up to you, and it is a positive a lot of prospective homeowners talk about while deciding between the two options.

Cons

1) Can Take Advantage of Your Inexperience

It’s not all rosy when it comes to banks and mortgages.

They can start to notice you’re inexperienced and they’re trained to find out if you are. When they do this, you’re going to be in a horrible spot, and it might be difficult for you to get a good deal. This is a significant investment and getting duped is hardly appealing.

2) Hard To Scout Multiple Deals

If you want to get the best interest rate on your mortgage, you want to make sure multiple deals are assessed.

This can be troublesome as you would have to reach out to each lender and that’s frustrating.

Mortgage Brokers

Pros

1) Huge Network of Vendors

Mortgage brokers are ideal for those who want to let their network go to work. Mortgage brokers do this for a living and have built up connections in the industry. They get the best rates because their network knows the client isn’t window shopping.

It saves time and gives both parties easier access to a good fit.

2) Do The Work For You

For those who don’t like the idea of visiting a bank and going through the details, it’s easier to trust a mortgage broker. As long as you choose a solid mortgage broker, he/she will take care of the negotiations.

Cons

1) Take A Fee For Their Service

There is a fee that comes along with the service, and this has to be accounted for. You’re not receiving the service for free. They are going to take a cut from the mortgage, and this is going to show when you sign up.

Pay attention to this fee before signing up.

These are the details you’re going to hear about when it comes to a mortgage broker or bank. It’s all about taking the time to vet both options and pick the one that suits you. Each person is unique, and that’s why the right answer is dependent on your priorities.

Is Better Credit = Better Mortgage Rates?

The credit score is the most influential determinant of the mortgage rate. The higher your credit score the lower (better) the interest rate on the mortgage.

How Do You Find Your Credit Score?

You are entitled to receive a free credit report each year from the 3 credit reporting agencies – Experian, Equifax, and TransUnion. The credit report does not include the credit score, but it reveals what information the credit bureaus take into consideration when calculating the credit score. You can obtain a free copy of the credit score through the credit card provider or bank.

This is a sample Credit Monitoring service by one of the credit bureaus, Equifax:

 

 

 

 

 

 

 

 

How Does Credit Score Affect Mortgage Rates?

High credit score borrowers typically enjoy lower mortgage interest rates than low credit score borrowers.

A high credit score is not only critical to getting a low mortgage rate but also influences whether you are able to get a home loan at all. Buyers under a particular threshold, usually a FICO score of 620 will find it especially difficult to secure a mortgage. It is possible, but they will need to do some digging.

A credit score of 740 or more usually qualifies for the best mortgage rates from the vast majority of lenders. The mortgage rates offered to the lowest and highest credit tiers can vary as much as one percentage point and a half.

What Do Lenders Look for?

Lenders generally prefer borrowers that have a long history of timely payments, low balances, as well as a mix of credit utilization – for example, an auto loan and several revolving accounts such as credit cards.

Lenders usually look at several variables on the credit report namely the outstanding debt, outstanding debt relative to total available debt, the length of your credit history, and the pursuit of new credit (the number of inquiries on your credit report).

How Can You Clean Up Your Credit?

You should ideally check the credit report about 1 year or so before you buy a home. This approach will give you enough time to correct the errors in your credit report and change the ways you can improve our score using credit.

Once you receive the credit report, scour everything from how your name is spelled as well as the previous addresses. You should also ensure that all accounts listed on the report belong to you and are reported correctly. If a particular account has been closed ensure that it is reported accurately.

Correct Any Errors and Wait

All the 3 credit bureaus have made it easy to dispute errors online. If everything is correct, you should pay down the balances the let time take care of the rest. Credit reporting agencies usually charge a fee if you would like to know your credit score. Lenders usually check all the 3 scores and use the median.

What Else Can You Do?

If you plan to buy a home soon, you should avoid applying for new credit. While it is not always avoidable – for example, if you need college financing or a car loan- you should try to avoid opening new lines of credit within a short time. Multiple new accounts can lower your credit score.

The Bottom Line

Is better credit = better mortgage rates? Yes, as clearly shown here. The credit score represents the overall credit history. It is based on the formation contained in the credit report that includes the total debt you carry and whether you pay your bills on time. Lenders usually consider the credit score as an indicator of how likely you are to repay the mortgage. Borrowers with high credit scores are considered less of a risk and are rewarded with better mortgage rates.