Breaking down bank loans and mortgage brokers
Unless you’re a textiles tycoon, a pro hockey player, or you hit some lucky numbers in the recent lotto, you’re likely going to need a mortgage broker or bank loan officer to help you buy a home. The key word there is ‘or.’ How do you choose? What are the pros and cons of each? How is the service different?
Mortgage brokers often have neat ads involving an attractive and powerfully dressed woman, holding an espresso cup over the slogan: “Her favourite things: double ristrettos and hardcore negotiations.” Should that seal it?
Recently in Real Estate Matters, we’ve looked at a few groups of professionals you might think to call on if you’re closing a house deal, with an eye to helping you get the most out of your time and money. Whether you choose a mortgage broker or a bank loan officer should depend less on great ads and more on your comfort level with different processes and products.
Do you prefer dealing with a single institution for all your banking — accounts, investments, credit cards, loans — because that offers you one login and password? Bank loan officer. (Sometimes, if you get a nice fat mortgage, you can get breaks on bank and credit card fees or better rates on HELOCs. Always, always ask.)
But if you’re confused by the banks’ posted rates — often different than the rate you can secure in a hardcore espresso-fuelled negotiation — think about a mortgage broker. The broker can have dozens of relationships with all sorts of lenders and is trained to haggle. All that competitive pressure often yields the most attractive rate.
Some brokers are more mobile and aren’t bound by bank hours. However, plenty of forward-thinking banks have ‘mobile mortgage specialists,’ which is a fancy of way saying their loan officers now have cars and cellphones.
However, mortgage brokers and the banks pose a similar problem. Banks will often give better rates to ‘better’ customers. Lenders will often give better rates to ‘better’ (by volume) brokers. How do you know, as a lowly home buyer, where you fit in these complex matrices?
You don’t, unless you ask some questions. To the bank: Will you give me a better rate if I have other products with you? To the broker: Can you secure me a better rate than Janey Ristretto down the street? Can Janey show you testimonials or evidence of her track record?
Once you’ve decided on broker or bank officer, they follow similar processes. They review your financial situation and discuss your future plans and risk tolerance. They help you decide on a fixed rate or flexible rate. They help you crunch the maximum amount you can afford, and whether you want to pay weekly, bi-weekly, or monthly. They also submit your application to a lender’s underwriters and will let you know if you’re ‘pre-qualified’ or not.
The importance of pre-qualifying shouldn’t be understated. If you’re pre-qualified, that gives home sellers more faith that their time won’t be wasted by negotiating with you. ‘Pre-approved’ is even better.
Sometimes a lender will pre-qualify you even if you don’t provide supporting documents about your credit and assets. If you’re pre-approved, that signals to a home seller that you’ve taken that extra documentation step. It’s not NHL paycheques or five-out-of-six-lottery-numbers security, but it’ll get you that much closer to the home of your dreams.