Mortgage Broker vs. Bank: How to Choose
A mortgage broker connects you with lenders, while a bank or credit union lends to you directly. The option you choose boils down to the type of service you want.
A mortgage broker can help you through the loan process, including paperwork and following up on anything needed for closing. With a bank or other direct lender, there’s no going through a middleman, and the lender will oversee the entire mortgage process.
Working with a mortgage broker may be a little more convenient and can help you shop around for loans. If instead you go straight to a bank, you’ll need to do some research yourself, but you’ll have more control over choosing the specific type of mortgage you want.
Mortgage broker: Pros and cons
Pros
- May have access to more loan options
- Can help with preparing documentation
- Offers more customized loan experience
Cons
- May not qualify for existing bank discounts
- May not have access to certain loan programs
- May charge you fees for their services
- May get a commission from the lender, which could lead to a conflict of interest
Why use a mortgage broker?
Working with a mortgage broker is a great fit if you want someone to help you shop around for the best home loan and work with you throughout the process. They’ll also know about perks like first-time homebuyer programs or specialized mortgages.
If your credit score is low, brokers may be better suited to help you find a loan program, like lenders that accept borrowers with bad credit or have nonqualified mortgages — although these could cost you more.
Read more about how to choose a mortgage broker.
Banks and direct lenders: Pros and cons
Pros
- Regular customers may qualify for discounts
- Can work directly with a bank employee
- No middle man, making for a more streamlined process
Cons
- Will need to check with each lender to see what you qualify for
- Might not have all types of mortgages
- May have strict credit requirements
Why use mortgages from banks?
Going to a bank or other direct lender instead of using a mortgage broker is best if you want more control over the loan process.
You will need to shop around on your own, but once you pick an offer, you’ll be able to communicate directly with the lender, which often (but not always) means faster processing times.
Also check with any bank or credit union where you’re already a customer. They may give discounts, saving you on fees or interest charges.
Read more about our picks for the best mortgage lenders.
Direct mortgage lenders vs. banks
Besides distinguishing mortgage banker versus mortgage broker, also be aware of what “direct lender” and “mortgage lender” mean.
The direct lender is the financial institution that gives you the loan. It can be a bank or credit union, which offers all kinds of services, or it can be a specialized mortgage lender that focuses on one or more types of home loans.
| Mortgage lender | Banks and credit unions | |
|---|---|---|
| Products offered | Mortgages, refinancing loans and home equity loan products | Wide variety of financial products like savings and checking accounts, mortgages, etc. |
| Rates | Varies, and depends on available loan options, but sometimes better than at banks | Varies, though regular customers may qualify for relationship discounts |
| Requirements | Depends on lender, with some lending to those with low (or no) credit | May have stricter credit requirements |
| Other differences | Usually only offer home loans | Can help with other financial transactions, depending on the bank/credit union |
A loan officer works for a direct lender, helping applicants find the best loan program and keep on top of paperwork during the underwriting process. These professionals analyze a homebuyer’s financial information and make recommendations on which loan to choose. They also work closely with real estate agents, receiving updates on the closing.
Tips for shopping for a mortgage
If after considering the mortgage broker versus bank choice, you decide to go directly to a bank or mortgage lender, then be sure to shop around for the lowest rates and desired repayment term. Here are three things you’ll want to do:
- Check your credit score: The mortgage options you qualify for depend on your credit. You can check your credit score for free with LendingTree Spring, and you can get free credit reports from the big three credit reporting bureaus (Equifax, Experian and TransUnion).
- Research loan programs: Do you want a conventional or government-backed mortgage? Or maybe you qualify for a special program, such as a VA loan? Take the time now to see what the minimum requirements are for the loans you’re interested in.
- Compare rates and try to prequalify: When you have a shortlist of lenders that you feel good about, see if you can get prequalified to get an idea of what you can afford. When you’re ready to buy, you can look into preapproval, though this requires a hard credit pull that will ding your credit temporarily.
Find more advice in our expert guide to shopping for a mortgage.
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