The trend in obtaining a home mortgage tends to lean towards home buyers choosing a mortgage broker. And mortgage brokers are happy to let people continue on that trend, as evidenced by the number of them who comment on websites and articles that address this issue. Unfortunately, what too few of them add is that for some individuals, obtaining a mortgage directly through a bank is truly a better choice.
The first advantage is about saving money. Prospective home buyers who only need to borrow relatively small amounts will end up paying more in fees relative to buyers who are financing a larger amount of money. Mortgage broker fees of $1000 might make sense for a $250,000 loan, but make less sense for a borrower who only needs $50-$60,000. Those fees would be a full 2% of the amount being financed and that does not make sense. Skipping a broker will remove a layer of fees and reduce the costs attributed to financing a home purchase.
Another advantage of obtaining a mortgage directly through a bank comes when borrowers work with a bank with whom they have already established a relationship. Financial institutions want to keep as much of their depositors money as possible which is why they all offer a variety of home loans. It is a commonly held belief of financial institutions that if they can hook a client into using at least 3 or 4 of their services, then the client will stay with them longer. So to that end, banks and credit unions create attractive financial products to keep their existing customers in house.
Most people might not realize this, but not all mortgage brokers have access to every possible loan option available. Many times brokers will have a limited lender panel to choose from and then their clients are not presented mortgage options that might exist through community bank or credit unions. For this reason, shopping for a mortgage directly with a bank can result in lower fees and or rates.
The choice of how to obtain a mortgage is a personal one. All of the various pros and cons of mortgage brokers or working directly with a bank need to be weighed carefully by the prospective buyer. Even if that buyer has used a mortgage broker in the past, that does not mean it is the right choice for them now. Ultimately, one size does not fit all in the home financing market.
Due diligence is required of anyone who wants to purchase a home. For most people this is the largest single investment they will ever make and it makes sense to take the extra time needed to choose the financing option that is the best fit for your life at that time.