How do you decide who is best to approach for your mortgage financing needs? I say either one would work, however, I do want to share a few key differences between the two. Firstly, let me start by distinguishing between the two titles; a Mortgage Broker acts as a connector between a potential borrower and many mortgage lenders while a Banker or Mobile Mortgage Specialist is a representative of one specific lending institution which is usually just the Bank they are employed with. Read below for what I believe are the 5 most important differences between obtaining your mortgage through a Mortgage Broker versus the Bank:
1. Qualifying Power
Both Brokers and Bankers use a set calculation to determine what the maximum mortgage is that a borrower can qualify to carry based on their annual income which is called total debt servicing ratio. Our calculation method simplified is that approximately 40% of the borrowers gross annual income must be able to support the following; costs associated with the new mortgage which include mortgage payments, property taxes, heat, ½ of condo fees if applicable as well as other debt obligations such as child support or alimony payments, car payments, loans, credit cards or lines of credit and payments for any other properties you own. The major differences I most notice with regards to the above is all of the Banks seem to have a different way of determining how those other payments are calculated in order to fit under that total debt servicing ratio guideline. For instance, some banks might include a minimum percentage of total balance owing or even the credit limit on credit cards and lines of credit even though the required minimum payment may be interest only. Another example is how the different lenders calculate rental income into the debt servicing and lastly, child support or alimony payments. Most banks and lenders may include those monthly obligations with your other debts yet a broker has access to some lenders who might instead deduct those payments directly from the annual income used to qualify which actually allows you to qualify for a higher mortgage amount!
The simple version of this is that a bank is one institution with their own suite of product offerings while a Broker works with many different lending institutions with varied product offerings. This can come in handy if your bank has declined your mortgage application as Mortgage Brokers are able to offer alternative options through different mortgage lenders.
3. Document Requirements
You will be expected to provide documentation supporting the information you have stated on your mortgage application such as verification of employment and income and proof you have the funds available for both the downpayment and the closing costs. Both Bankers & Brokers have some flexibility when it comes to exactly what documents will be required so do have a frank upfront chat with your mortgage professional about what paperwork you will be asked for based on your individual circumstances. Do ensure you will be able to obtain them because if you can’t for any reason, be prepared to discuss alternative options which may result having to work with a broker anyways.
4. Who’s Negotiating
Mortgage Brokers do the negotiating and shopping on your behalf, whether it is finding you the lowest interest rate or a private second mortgage in Czar, Alberta. With a bank, it may be you doing the negotiating on your own behalf.
As a Mortgage Broker I am always advising my clients how they will be able to make changes to their mortgage after it has funded. I am able to place a mortgage with banks, trust companies, credit unions as well as mortgage companies so I make sure to ask how you want to manage your mortgage after the fact. Most mortgage companies whose only business is mortgages are accessible via phone, fax and mail and a few are even leading the pack with interactive online interfaces you can use to manage your mortgage. With the other lenders, they usually have online banking available or you can walk into a bricks & mortar location and talk face-to-face with someone about your mortgage changes. Keep in mind you may have to make an appointment and you most likely will have to visit them during their “banking hours”.
Bottom line, whether you go through a Mortgage Broker or a Banker, pick a professional you can trust. They should take the time to talk with your about your current financial situation and your future financial goals. When you have a power team all working to help you meet your goals, you can feel confident you are getting a customized solution to fit your needs and lifestyle.
If you’re looking for a trusted Mortgage Professional with Personality, contact the MortgageGirls at 780.433.8412 or email firstname.lastname@example.org. Stay in the loop by following us on Twitter @mortgagegirlca.