Chandler, AZ Real Estate – Broker or Bank?
Bank or Broker for Chandler, AZ Real Estate?
As you start the process of searching for Chandler AZ real estate, one question you will have to address is the question of your financing. Shopping for mortgage loans can be overwhelming and can detract from the fun of buying a home in Chandler AZ. When shopping for a home loan, you have two basic options: borrowing through a broker or working directly with a bank. Both offer benefits and drawbacks that need to be waded through before you make your decision. Here are some considerations to make as you decide which of these options is right for you.
Why a Broker?
When purchasing Chandler AZ real estate, a broker is one option for your home loan. Brokers work as a go-between between the home buyer and the bank. Borrowers approach brokers with their home loan needs, then brokers dig into a pool of potential lenders to find a product that is the best possible fit for the borrower.
Variety is the main benefit of working with a broker. Your broker will have several lending options available to a borrower with your credentials. The money for your home purchase, if you choose to use one of the options presented, comes from the lender, not the broker.
Brokers can find mortgages through large banks, local banks, mortgage banks and credit unions. Because brokers have more variety of loans and lenders available, they may be able to offer you a greater a better mortgage deal. Brokers are rarely tied to just one lender, so they can sort through as many as 20 different companies, all of which offer unique programs and mortgage solutions.
That said, if you are going for something fairly standard, like a 30-year fixed-rate mortgage, you aren’t going to find much variety because of current market conditions. The differences between one loan and the next are pretty small for traditional loans.
However, for those borrowers who have extenuating circumstances or need a creative mortgage option, a broker can be highly beneficial. The variety available to the broker helps the borrower find a mortgage that is a good fit, in spite of lending or credit challenges.
Brokers are also beneficial when buying a home in Chandler AZ because they handle the paperwork and all lender interactions. Brokers have a better understanding of the lender’s guidelines and can guide the homebuyer into providing the right documentation to improve the chances of loan approval. Brokers will look over all paperwork before it is sent to the lender, so your mistakes are caught before the lender sees the forms.
Of course, brokers don’t offer all of these services for free. Brokers are paid a portion of the loan’s value, and sometimes the borrower pays that fee. The brokerage fee can be paid upfront or rolled into the loan, but you will want to know if this is a cost you have to cover before you choose to work with a broker. Always ask whether the lender or borrower pays the brokerage fee, and how the fee must be paid, before choosing to work with a broker.
Why a Bank?
Some Chandler AZ realtors will recommend a specific bank instead of a broker, depending on his or her experience with local lending options. Banks can be beneficial because they are the source of the funding. Brokers provide variety, but banks are where the decision is ultimately made. Borrowers with difficult circumstances may find their approval stalls with the broker, but exceptions are available from brokers.
If you have had a relationship with a bank for a while, such as the bank where you have your checking and savings accounts, you may want to start there in your search for a loan. The lender can see your recent history with them and may offer you favorable terms on your home loan, even if you have challenges in your financial history that make getting a loan more difficult.
Unfortunately, the mortgage crisis has caused all banks to tighten their lending standards, and this can lead to challenges for non-traditional borrowers or borrowers working with small, local banks. Bigger banks may be a better bet than small local banks, because the secondary market for mortgages has shrunk. Therefore, banks that can hold loans without the need to resell them are able to offer more mortgage options. That said, large jumbo loans are harder to get than they once were, so you will need to visit several banks in order to find one of these if you are shopping for Chandler AZ real estate in a high value area.
Better to Compare
So which is better? The truth is it depends on your circumstances. Borrowers should always compare the offerings from two or three brokers and two or three banks. At a minimum, you should talk to three or four different mortgage sources.
How can you compare the offerings? Interest rates are the first factor to look at, but in reality interest rates are not going to vary much in a competitive market. You also need to look at lock-in fees, points and other mortgage costs. Once you have narrowed down your options, call the lenders and ask for an estimate of the closing costs. Also, consider whether you will face a prepayment penalty.
When comparing loans, make sure you compare the same type of loan. If you know what loan is best for your needs, then obviously compare that type. If you aren’t sure, consider comparing terms on a 30-year fixed rate loan, then finding the right loan once you have chosen a lender.
Also, remember that mortgage interest rates change daily, and sometimes even by the hour. If you see a loan that has favorable terms and a great interest rate, you may want to lock it in. There’s always a chance that the rate will change.
Keep in mind that responsiveness is an important part of this process. A bank or broker who is responsive and able to answer your questions thoroughly is going to be a good partner in the process as you look for the right home loan. Most Chandler realtors will caution you not to work with a lender who seems to be only interested in quoting rates and not providing helpful support.
Buying a home in Chandler AZ is filled with decisions. Which house, which neighborhood and which Chandler AZ realtors are best for you all must be considered. Once you have started the process, you will also need to choose your lender. Whether you choose a broker or a bank, having financing available before you start actively shopping for a home will improve your chances of success.