Pros and Cons of Getting a Mortgage From a Bank, Broker, or Online Lender

For most people, buying a home means getting a mortgage. But there are a lot of different ways to go about that process, each of which has different pros and cons. If you’re thinking about buying a home, it’s important that you understand them so you can make the best decision for your needs and financial future.

So what are the options and respective the pros and cons? A recent article from realtor.com outlined different places to get a mortgage, and some benefits and disadvantages of each, including:

• Bank. Most banks (local and national) offer mortgages. If you already have a relationship with a bank you use for your checking and savings accounts and opt to get your mortgage from them, you may be able to get a lower rate on your mortgage, which is a major pro. But banks also tend to have limited mortgage options and higher credit standards than other types of lenders, which can be a con, particularly if you are buying a condo in a complex which allows nightly rentals, are self employed or have less-than-perfect credit.
• Broker. A mortgage broker has relationships with multiple lenders, and leverages those relationships to help you find the best mortgage for your situation and needs. Brokers are mortgage experts, so if you have a unique situation that could make it harder to get a mortgage — like you are buying a condo in a complex which allows nightly rentals, are self-employed or have bad credit — they can be a huge asset in explaining your options, and helping you find a loan. But they also charge fees (generally 1% to 2% of the loan cost) which, depending on the situation, you might be responsible for covering, which can be a con for buyers trying to keep costs as low as possible.
• Online lender. Online lending has become increasingly popular over recent years, and it’s now completely possible to apply for and secure a mortgage without ever stepping foot out of your home. While many consider the convenience of online lending a benefit, for first-time buyers, the lack of one-on-one support can be a challenge, as there’s no one to guide them through the process. Online lenders are often not a good option when buying in a complex which allows nightly rentals, you are self employed or have less than stellar credit.

Bottom line? There’s no one-size-fits-all solution to getting a mortgage. Instead, you’ll want to research your options, and figure out what the best solution is for you. Ask your real estate agents for lenders with a proven track record of success in the local area and the specific type of property you are purchasing.