Mortgage Broker vs. Bank - NerdWallet (2024)

FAQs

Is it better to use a broker or bank? ›

Mortgage brokers can offer more loan options because they work with multiple lenders. Banks, on the other hand, provide their own loan products but may have more rigid guidelines. Consider factors like available loan options, personalized service, and who can provide you with the best terms and rates.

Because mortgage lenders make loans directly, they are able to offer more flexible eligibility requirements. Local banks often have fewer mortgage options and much more stringent lending guidelines than mortgage lenders.

If affordability is a bit tight, a broker will know which mortgage lenders are more likely to approve your application. They can also help you if you're buying a less conventional property, such as a flat over a shop or a home built using unusual materials.

Because online mortgage lenders typically have less overhead expenses compared to brick-and-mortar banks, they often pass on those savings to borrowers. This can often mean better interest rates and fewer fees for customers.

Use a mortgage broker if you want access to the entire market or have a more complex financial situation, such as a history of bad credit or 'non-standard' income. Circ*mstances like these often call for a specialist mortgage lender, and you'll need a broker to find the right one for you.

While bank balances are insured by the Federal Deposit Insurance Corporation (FDIC), investments held in a brokerage account are covered by the Securities Investor Protection Corporation (SIPC). It protects investors in the unlikely event that their brokerage firm fails.

Fixed fees typically cover the broker's services, from lender research to finding and securing products that suit your needs and circ*mstances best. However, some mortgage brokers might charge additional fees for complex cases or if you require extra services.

Unless you have the same level of mortgage knowledge as the broker themselves, a mortgage broker can likely get you a bigger mortgage than you would have got yourself.

Working with a mortgage broker can potentially save you time, effort, and money. A mortgage broker may have better and more access to lenders than you have. However, a broker's interests may not be aligned with your own. You may get a better deal on a loan by dealing directly with lenders.

Is it worth talking to a mortgage broker? ›

Mortgage brokers often work closely with lenders, so they may have access to insider knowledge, deals and rates the average home buyer doesn't. Mortgage brokers also often have strong negotiating power and may help you get a lower interest rate on your mortgage because the banks want their business.

The first thing a broker will do is meet you and get a better understanding of what it is you want. Brokers are, after all, your finance professionals, so the better they get to know you, your financial circ*mstances and long-term goals, the better they can match you with a product that is right for you.

A mortgage broker can offer a wider array of options and streamline the mortgage process, but working directly with a bank gives you more control and costs less. Kate Wood is a mortgages and student loans writer and spokesperson who joined NerdWallet in 2019.

Direct lenders can sometimes offer more competitive mortgage rates because they are more flexible and focused on mortgage loans, whereas banks have a broader spectrum of services, like credit cards and savings accounts, to manage.

Local lenders often provide more personalized attention and better customer service. You can probably meet your loan officer face-to-face if you'd like, but either way you'll be able to take advantage of their expertise to help guide you through the mortgage process while addressing your specific needs.

Key Takeaways

Working with a mortgage broker can potentially save you time, effort, and money. A mortgage broker may have better and more access to lenders than you have. However, a broker's interests may not be aligned with your own. You may get a better deal on a loan by dealing directly with lenders.

Some brokers could favor working with certain lenders, leaving out others that may offer you a better deal. Because not all lenders work with mortgage brokers, you may not have access to certain loan programs. There's no guarantee that a broker can find you the best deal.

Knowledgeable. A broker brings their extent of knowledge to you. They take over the time-consuming work of researching multiple insurance plans, and then make the best recommendations for yourself, employees, and/or your company.