Why Do People Take Mortgages?
A Mortgage can mean many things to many different people. To some, it can mean needing money for personal reasons. To some, it can be a way to invest inland. For these reasons and many others, mortgages are seen as a way of selling without actually selling and while this is true, the nature of taking out a mortgage requires a good amount of trust from both involved parties. Whether it is a mortgage from a bank or a mortgage broker.
A mortgage provider is a large financial institution that provides mortgage loans. This can be a bank or any other type of institute and they have a specific set of rules involved with the entire process. They have guidelines and requirements for those who can apply and those who can’t. Lenders have certain borrowing rules to assess your creditworthiness and ability to repay a loan. They establish the terms, interest rate, repayment schedule, and other critical components of your mortgage.
More to Read: Making the right choice for a mortgage broker
The two major options in this procedure are direct lenders and mortgage brokers. Each has its own sets of pros and cons.
Mortgage from A Bank:
As previously discussed, this is the more old-fashioned approach to getting a mortgage loan. This process involves a person using the resources of a large financial organization to get their mortgage. Examples of such organizations are banks, specialized mortgage companies, and credit unions. These places have a portfolio of possible loans they can offer and they assess the maximum loan amount that can be provided to a homeowner. During this entire process, the home owner’s main interaction is with the mortgage advisor. These are financial/sales experts that work with the bank and guide the homeowners through the process. The mortgage advisor will also be the person that will decide if the homeowner is eligible for a loan and is credible enough
Think of this option as hiring a middle man in between the mortgage process. A mortgage broker is a specialized person with experience in mortgage handling and his objective is to find a mortgage lender whose requirements and criteria best suit that of the homeowners. To do this a mortgage broker will assess his clients and get crucial financial information regarding income, pay stubs, tax returns, asset and investment information, and credit reports. He then uses this information, along with his expertise in the field to determine which lender is most suitable. The mortgage broker will have information regarding a network of lenders and will have worked with them previously. These relationships can help in the process as well.
Who’s Right for You?
Both roads to getting mortgages have their own sets of positives and negatives. With direct lenders, the responsibility and burden of getting the loan fall entirely on the homeowner. This can be seen as a positive because this means that the person can choose his plan and be involved throughout the entire process. On the other hand, the use of a mortgage broker takes a lot of that responsibility of the property owner’s hands. In this situation, the mortgage broker will use his expertise and network of lenders to determine where to apply for a mortgage and what type of plan will best suit his client. Concurrently, this means that a mortgage broker will have many more plans he can provide from various organizations but on the other hand, with direct lenders, the owner is limited to a small selection of plans provided by the bank. These services may still come at a cost.
Naturally, a mortgage broker will take a fee for his services, on top of the regular fees that are part of the entire process. This means that you may be paying more than required. Oppositely, not knowing what mortgage plan is best could eventually lead to paying anyways. At the end of the day, both options can be right or wrong for you. A person taking out his first mortgage who is not well versed with the financial market may make severe mistakes in choosing what works best for him and his economic status and would suffer. For this type of individual, the benefits of a mortgage broker are immense. On the flip side, anyone who has experience taking loans and having prior relationships with lending institutions would only be overpaying for a mortgage broker that is not needed.