When you choose to buy a home, it’s highly unlikely you’ll pay for the purchase out of pocket. The money will ultimately come from one of two sources: a banker or a broker. But how do you know which one to choose? Both have their benefits and drawbacks, but it’s good to know what to expect from either source.
For many first-time homebuyers, their bank is the obvious choice. After all, most people have been with their bank for years and trust the institution with their money. Maybe they even have a personal relationship built up with the staff and want to keep their financial life simple by handling everything in one location.
There are benefits to this. For example, your bank knows your overall financial situation. They know your existing debts and loans and can help you look at the big picture regarding your mortgage. Your bank can help you plan a budget and can help you find a mortgage rate that works best with your overall finances.
The downside, of course, is that your bank only offers rates available to them. You’ll only have access to your bank’s products, and while it’s possible (and likely) that you can get a discount on their posted rates, you will be responsible for the negotiations. If you prefer not to engage in lengthy financial discussions, you’ll see only the base rates and not the lower rates your bank can offer.
Another potential downside is the possibility your bank will not provide a mortgage loan. Not all banks are involved in the mortgage world. Even big-name banks sometimes do not provide mortgages. If this is the case, you will need to consider a different source.
In the beginning, you won’t have the same relationship with a mortgage broker that you would with a bank. However, brokers specialize in finding affordable, fair mortgage rates for potential homeowners. This is the primary benefit of using a broker over a banker; while a bank covers mortgages, investments, credit cards, etc., a mortgage broker provides mortgages and nothing else. As a homebuyer, you can put that expertise to work for you.
Brokers can evaluate products and loan terms offered by a number of different lenders. A broker can find the lowest possible rates for you and then help you eliminate potential lenders based on your requirements. The best part is, brokers work on commission paid by the mortgage lender, not by you. You don’t have to worry about higher prices just because you use a broker instead of a bank.
There are downsides, though. Not all brokers are created equal, and it’s important to vet the broker you choose for their experience and relationships. Not all brokers will have established relationships with reputable vendors. While this doesn’t mean you’ll find yourself on the receiving end of a shady contract, it does mean they might not be as effective as one that’s been around for a while.
To ensure your broker is qualified, look for Accredited Mortgage Professional status and/or membership in professional organizations like Mortgage Professionals Canada. You can also check with the Calgary Chamber of Commerce for information on how long the broker has been in business, what lenders they deal with, and to find customer testimonials. You can also search online for news related to them. The technology age has made it easier than ever to find information about businesses ahead of time, and a company with a lot of happy customers is one worth checking out.
Take the time to do your research. Ask family and friends if they have experience with brokers, and if so, which ones they recommend. Look at the industry itself. What brokers have received awards? Which ones have been recognized? If any of those brokers are in your area, reach out and get in touch.
Every person’s situation is different. If your bank can offer you better rates and you feel more comfortable going through your bank than a broker, then do so. However, if you’re open to the possibility of searching for lower rates and don’t mind the time it might take to forge a relationship with a lender, you may discover they’re a better choice.