Most people like to get a good deal. It’s what led to the rise of Amazon, Walmart price matching, Black Friday madness, and couponing. But how do we know we are getting a good deal? If we buy something on sale, we might compare the sale price to the original price. Sometimes we saw the product elsewhere and went searching for a lower cost option. In both scenarios, we feel comfortable knowing that we are indeed getting a better deal. 

Would it surprise you if I told you that there are options when it comes to a mortgage loan; that there may be a better “deal” out there? Many people approach their bank for assistance - after all, their bank might already have provided loans for vehicles, credit cards, and even personal loans. It seems like a logical place to begin…however, this could lead to fewer options for loan programs and higher interest rates.

Differences Between a Mortgage Lender and a Mortgage Broker

Banks are direct mortgage lenders. A lender is a financial institution that makes loans directly to the borrower. The products (i.e. types of loans and terms that come with the loans) are offered directly from that single lender. This can mean that you are being offered a one-size-fits-all product. One of the main benefits to working with a direct lender, like your bank, is that you already have an established relationship with them. You probably trust that they will try to do what is best for you and offer you the best loan product available. However, the products they have available to them will always be limited.

A mortgage broker does not lend money directly to the borrower. They act as a middle man between the borrower and lender, and they have access to many different products and investors. When you apply for a loan with a broker, they will ‘shop’ for a loan product that best fits your needs. This is ideal as a borrower because it means competitive rates and more options, especially if you do not meet the credit or financial criteria required by your bank.

Have a look at this chart (via www.bankrate.com) for an example of what comparing products can look like.

As you can see, there are several different options here, with varying interest rates and monthly payments. A broker can ensure that you are being offered the least expensive option. 

Another huge benefit to working with a broker is that they can handle difficult loan applications. If you have an unconventional source of income, or if your credit score is below average, direct lenders may be unable to offer you financing at all, or your approval may come with a steep interest rate. 

Your 45 Day Mortgage Credit Check Window

The process of applying for a loan through a lender is the same as applying for a loan through a broker, but this is where the similarities end. If you have already applied with your bank, keep in mind that you are allotted 45 days to apply for additional mortgage loan approvals with no additional impact to your credit score. This 45 day window begins as soon as you submit your first application, so it is important to move quickly. We always recommend checking with a brokerage before you move forward to make sure you are receiving the best product and price. 

A home loan is likely the biggest loan you will ever take, so it is critical that you:

• Understand your right to shop 
• Know the difference between a lender and a broker 
• Feel confident that your rate is the best one you could have received