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What's the Best Way to Shop For a Mortgage?

Ask Savvy: Is It Better to Get a Mortgage From a Bank or a Broker?

Dear Savvy,

My fiance and I are just getting into the process of buying our first house. We were just walking around and found an amazing house at an amazing price. Neither of us have gone through the process of getting pre-qualified for a loan so I have a few questions of what would be the best way to go about it. I have heard there are two ways, getting your mortgage through a bank and pay less fees but possibly not get the best rate, or get your mortgage through a broker and possibly get a better rate, but with higher fees. I have a credit score that is pretty high (above national average) so I want to take advantage of that. What do you suggest is the best way to go about this? Would you suggest a credit union?

To see my answer just

Mortgage loans can originate from several types of lenders, such as mortgage brokers, mortgage bankers, banks, credit unions, and savings & loans. The majority of the nations mortgages come from mortgage brokers. They're compensated on commission and will have higher closing fees. Simply ask what the broker's fee will be and make your educated decision on whether paying that fee is worth it if you get a better deal on a loan.

Mortgage bankers refer to an actual bank or loan officers at a bank, and they generally have set fees so there won't be any real surprises in that realm. The fees are consistent, whereas with mortgage brokers the fees can vary from one broker to another.

Shop around as much as you can to find the best deal. I called my BFF who was just approved for a loan on her first place, and she said that your real estate agent would have lender referrals to get you started and give you some direction. Homeowners, what were your experiences in shopping for a mortgage?


Join The Conversation
ginandsugar ginandsugar 9 years
We went with our bank. I like the security of knowing who is managing my account. Even if my mortgage gets sold (which happens all the time) it will always be serviced by my bank so I only have one contact for the life of my loan. I also know that my bank isn't going to close its doors in a month.
JaimeLeah526 JaimeLeah526 9 years
bfly1133 Thanks! You're a great help
SkinnyMarie SkinnyMarie 9 years
Good info from everyone
linb linb 9 years
I bought a home by myself about a year and a half ago. I was so scared because I had no idea what to do, what to look for, etc. At 22, I obviously had zero experience with home buying. It was the most stressful thing I have ever had to do. I would say that bfly1133 is right on - find someone that you trust. My realtor referred me to a great broker who was willing to work with me at all hours of the day, and I feel that she helped me get the best deal possible.
bfly1133 bfly1133 9 years
Being in the real estate business, I think I can offer some help in this area. :) First and foremost, it really doesn't matter if you use a traditional bank or a broker. All that really matters is that you find someone that you trust that provides you with a good loan program. Ask for referrals from friends, family, co-workers, and your real estate agent. They really are your best best. If you are first time home buyer you should ask if they know of any local, state, or federal first programs. Another word of advice, sometimes the best rate doesn't mean it's the best program. The closing costs could be super high, the lender could be unavailable when you need them, or they could be putting you in a program that isn't truly right for you. Make sure to weigh all the information, not just rate. And my last bit of advice (then I will get off my soap box!) is when you sit down with a mortgage lender have an idea of what you want to pay a month. Tell your lender than number and have them determine your qualifications based on that number. You may qualify for a really high purchace price, but that doesn't mean really should pay that much for you to be comfortable and able to continue to save properly. Hope that helps!
Liss1 Liss1 9 years
We are buying a house right now and we are using a mortgage company instead of a bank. The reason we picked them is because the company our realtor works for has a mortgage division/company. I thought it would be easier since they all work in the same building. I don't know if there is a big difference. We are happy so far the only thing that bothers me is they pre-approved us for ALOT more than we would feel comfortable paying. We have sat down and done the math and figure out what we would feel ok paying each month and it is no where near what they say we can afford. I think that is why a lot of people get in over their heads because the bank says they can afford X amount and they say ok and don't bother figuring out if they can afford that much on a monthly basis.
jknocking jknocking 9 years
If you are a member (or eligible to become a member) of a credit union, check out their rates. We have found that they often have lower rates.
McCubcakes McCubcakes 9 years
I am currently going through this process and contacted banks and brokers. I found the banks to be more reputable and less "shady" than the brokers and ultimately went with a bank.
scorpstar77 scorpstar77 9 years
We bought a condo, which involved getting approved by a lender who will lend to owners of non-warrantable condos, so we went to a lender who specializes in mortgages for condos. In general, I think the up-front fees of a broker are worth the lower rate they offer - $2000 now can save you $20,000 over the life of the loan - but you have to make sure the broker is reputable. Mortgage brokers have a reputation of being shady simply because it is so easy to set up a broker scam. That doesn't mean you should avoid them, because a good broker can get you a really great deal, but check references, make sure they have a website with an established address and phone number, ask to hear the history of the company to make sure they're established, etc.
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