To understand fully the system of obtaining a mortgage loan we must look at the two sources in which mortgage loans are originated. The two ways in which a perspective home buyer can borrow money come either from a bank, where naturally money is stored and doled out in a secure manner, or a mortgage broker, whom specialize in providing loans designed to use houses as collateral for the money being loaned. Both are viable options for people considering the purchase of a home, they both have positives and negatives which will be described below.
Taking out a mortgage loan from a bank for generations has been a great way to finance the purchase of your new house. Banks have large amounts of funds to dip into when you go to them seeking a home loan. They are regulated by the government and most likely can give you a lower interest rate on the money that you need to borrow. The problem with banks is that their intense network of financial transactions means that your mortgage to the bank is just another number on their balance sheets. Although smaller banks will provide a higher level of service than mega-banks, their commitment to you as a customer is relatively based solely on bills and payments. This can play a problem when a financial problem arises and you need highly knowledgeable and caring support to help you maintain the ability to repay the loan and keep your house. So although the rate might be lower the level of service most likely will also be lower.
Getting that same mortgage from a licensed mortgage broker has its own benefits and drawbacks. A mortgage broker needs to gain funds from investors or banks for each individual loan it writes. This means that the rate they can loan you the money at will be based on the rate at which they have the money loaned to them. Although the rates aren't too much higher, they probably will not be as low as if you originated the mortgage directly from the bank. The huge benefit that comes from taking out a mortgage with a licensed broker comes from the much higher level of service they will provide throughout the duration of the loan as well as the incentives they will give you in order to entice you to do business with them which often includes lower closing fees and no penalties for paying down the principle early. Also in a time of financial woes a mortgage broker would be much more willing to work with you as a customer in order to help you continue to repay the loan and interest on that loan. If you default on your loan it is much more of a burden to a mortgage broker because they need to repay the loans they took out to finance your loan. So basically a mortgage broker provides more service than a bank and is more willing to work with you in order to prevent foreclosure, but the interest rate on the loan will be slightly higher.
Overall both banks and brokers are good sources of mortgages, it really depends on your individual situation, financial security, and future plans. For example if you have a very secure job which pays well and have a decent nest egg to make sure if anything goes wrong you have a back up plan then using a bank to secure a mortgage loan would probably be the better decision. If you have some misgivings about your job security and don't have too much leeway with your savings then finding a mortgage broker to guide you through how much money you can borrow and how easily you can repay that loan would be a better idea. The best option always when making a huge financial decision such as purchasing a new home involves shopping around and learning as much as possible in order to make the most educated choice.
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