Bank vs Broker: What’s the Difference in Mortgage Services?


“Should I work with a bank or a broker?” This is a question often asked by home buyers as they evaluate options for a mortgage service provider who will best suit their needs. Recent news has only done more to shine a bright light on how the lines between mortgage services, traditional banking (such as checking and savings accounts), and higher level investments are blurred. Consumers today have choices that come with greater complexity and consequence than in years past.

Let’s look at how each of the service models are different.

researching a mortgage proWorking With A Bank
When one traditionally thinks of using a bank to obtain a home loan, there is often an assumption of convenience associated with it. In other words, some believe that if they already have their checking, savings and investments with an institution, it will offer them the best terms on a mortgage. Additionally, since a customer relationship is already established and it’s implied that the bank has all of the client’s information, the process itself should be easier. Right? Actually, neither of these assumptions are a given.

What if your bank does not offer the type of loan you seek? Or, what if your real estate market makes a pre-approval letter from this institution appear weaker to a seller than the letter of a local lender or broker? What if your bank requires you to structure your accounts and balances in such a way that makes you feel they control more of your finances than you’d prefer?  These are all important questions to evaluate as you consider the various service options.

Working With a Broker
The broker model has been plagued by the middleman myth – since the broker uses another lender to fund the loan, it’s assumed that they must inherently charge more fees to the client. Even when a broker might be able to offer more options, better rates and a wider range of lending sources, some borrowers are turned off by the idea of providing his or her financial information to someone other than their primary bank.

Bridging the Gap
If neither of the above seem to be exactly what you need, there is another mortgage service model that addresses the concerns of both banks and brokers, but also reinforces their strengths. A mortgage lender like RPM is able to bridge the gap by focusing specifically on delivering the best home loan experience to our clients. We have a singular focus and aren’t distracted by cross-selling other financial services and products. This allows us more time to learn about the unique needs and dynamics of lending in the communities we serve. As a mortgage lender, we aggregate many channels of funding for the home loans we make, whether they are conforming, FHA, VA or jumbo in nature. We realize that not every borrower fits in today’s narrow credit box and we are driven to find the solutions that meet our client’s needs in a financially responsible manner. While the diversity of our products is similar to a broker’s, our reputation and volume allow us to offer consistently competitive rates and costs.

Avoid Assumptions – Ask Questions
In many ways, there are more choices and more ways to research home loan options today than ever before, so it’s important to avoid assumptions before beginning your journey. Whether it’s a bank, broker, or a lender who bridges the gap between both, there is a viable fit out there for your needs. Contact a loan advisor today to see how we can be of service and help you consider your options.

By Rob Spinosa