Be careful of mortgage brokers, they may offer lower rates, but often have higher loan costs. You have to factor in all the costs against the rate.
Typically, a mortgage broker can offer lower rates than a big bank because they can pass on more of the savings to the consumer and operate more efficiently.
I feel confident answering this because of my experience. I've worked for one of the nation's largest mortgage banks, owned and operated my own mortgage brokerage and I am an accountant.
Think of it this way, if a mortgage broker only has to make $10,000 a month to pay his or her expenses and a big bank has to pay $1,000,000 a month to pay monthly overhead, they can charge you less and still make a profit.
The big banks know this also, that is why they establish "wholesale" deparments that offer their mortgage products through the mortgage broker network. Many of the big banks will offer lower rates through their wholesale department then they offer through their retail departments.
Regarding "beware of brokers" advice:
(1) compare the APR on the Truth In Lending statement of the quotes that you are getting. That will show you who is providing you the best rate AND the lowest closing costs.
(2) check with the local regulatory agency that oversees the mortgage broker to confirm their licensing and to see if they have any complaints. Mortgage brokers and bankers are regulated on the State level.
If you have more questions, contact me through my website www.bestfhalender.com.
Good Luck.
Historically, the big banks were not interested in doing small residential loans. That was reflected in their rates. They wanted to loan on $8Million office buildings where they could make big money.
That is no longer true. Their rates are competitive or better than brokers.Get recommendations for local realty agents.
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