Mortgage Lender: Bank or Broker?

Which mortgage lender suits your needs the most?

When you want to apply for a mortgage Canada, especially if it’s your first time, you need to know which mortgage lender you are going to. Most borrowers weigh their decisions if they should apply for their mortgage with a mortgage bank or get help from a mortgage broker. But what is the difference between a bank and a broker? Let’s start with Mortgage Broker.

What is a Mortgage Broker?

A mortgage broker works for you and finds a mortgage lender that will be best for you. A broker connects a borrower and a lender; they collect and verify all necessary paperwork. They work with various mortgage lenders, which means they can offer you various loan options as a borrower.

The mortgage broker aims to complete real estate transactions as a third party between the lender and borrower. They typically get paid after the loan closes and the funds are released. Remember, a broker is working for you but is paid by whoever lender you choose to work with.

How to Choose a Mortgage Broker?

1. Make sure you know what a mortgage broker does.
2. Ask for referrals.
3. Check online reviews and complaints.
4. Ask for their experience.
5. Ask if they can help you given your personal circumstance.

Advantages of a Mortgage Broker as a Mortgage Lender

1. Helps you reduce work – a broker collects and verifies documents that your lenders need to approve you. They will do almost all the work for you, from paperwork to negotiations.
2. A broker may have better access – Brokers know lenders you don’t know. So hiring a mortgage broker might be a good idea when you apply for a mortgage. They have various connections and better access to lenders.
3. A mortgage broker may be able to manage your fees – your mortgage broker can negotiate with your lender and have other fees like origination fees, applications, and appraisal fees removed. Hundreds of dollars can be saved later.

Disadvantages of a Mortgage Broker as a Mortgage Lender

1. They may charge a broker fee. – either you or the lender pay the broker fee. Usually, lenders will pay for them, but sometimes you will have to shoulder the broker fee. Before paying and signing anything., assess your budget and think before making the decision because the broker’s fee can be expensive.
2. They may not have as much experience with self. – employed or unusual-income borrowers.

What is a Mortgage Bank?

A mortgage bank is a bank that specializes in mortgage loans and is a direct lender. You can always shop around for banks that have lower interest rates. However, shopping for a mortgage bank is a hassle, so sticking to your current bank will be the best choice.

Advantages of a Mortgage Bank as a Mortgage Lender

1. Familiarity – given that you have been with a certain bank for years, you are now familiar with how it works and its regulations. In addition, you already know that you can trust the bank with your finances; it’s not easy to build trust in any bank, and that is why applying for a mortgage you’re already familiar with is a great first step.
2. Your bank trusts you – if you have a clean bank history, then most likely, it has already put its trust in you. It will be easier for you to get approved if the bank trusts you. You can negotiate terms and interest rates and get access to deals you can’t get a hold of by yourself.

Disadvantages of a Mortgage Bank as a Mortgage Lender

1. Banks only offer their product – banks have limited loan options that they can offer you. Because they are your direct lender, the available products are not that wide. And you won’t be able to explore more options.
2. Banks have strict conditions for approval – it’s hard to get exemptions from the bank because of their protocol. You can encounter a series of approvals before you get approved on the mortgage itself.

If you decide on which lender you’re going to, you must be careful about what you’re telling your lender. Any small mistake you tell with your lender can lead to disapproval. Below is the list of what you can’t say to your lender.

A No-No to a Mortgage Lender

1. Anything untruthful – any lies you tell your mortgage lender can put your mortgage approval at risk. And misleading information is a felony. So you might want to stay honest with your mortgage lender and not give false information.
2. Asking about foreclosure – anything about foreclosure is a red flag to any mortgage lender because why would you ask for foreclosure if you’re applying for a mortgage?
3. “What’s the most I can borrow?” – Before applying for a mortgage, you should have researched and don’t want to sound uninformed in front of your lender.
4. Changing jobs annually – if you tell your lender that you’re changing your job annually, you can be labeled high-risk. Most lenders require at least two years of employment, and stable employment can increase your chance of getting approved.
5. Plan to quit a salary-based job – a commission-based job does not show employment stability. So you might want to stay on your salary-based job to increase your chance of getting approved.

Conclusion:

Applying for a mortgage is one thing, and choosing a lender for your mortgage is a different topic. It would be best if you were careful in choosing the lender. You decided on the lender; you have to trust your finances, which is a huge responsibility. Trusting the right mortgage lender is easier said than done; however, you don’t have a choice. The only choice you have is which lender you can trust.

If you need a private lender for a mortgage, ask for referrals or do your own research to find the best one.