Mortgage Broker vs. Bank - NerdWallet (2024)

» MORE: How to get a mortgage

• Help with prep. You can start working with a mortgage broker reasonably early in the homebuying process. In addition to answering your questions about getting a home loan, a mortgage broker can help you go about gathering all the documents and information you'll need to apply for a mortgage.

• Access to various loans. A bank's loan officer can only present you with home loan products the bank offers. A mortgage broker, on the other hand, can help you obtain any home loan. If you're looking for a type of mortgage that's less common, working with a broker can give you a shortcut straight to the relevant lenders.

• Customized assistance. Suppose you're someone who might not qualify for a home loan, or you have circ*mstances that require more explanation (for example, gaps in employment or a thin credit file). In that case, a mortgage broker may be able to help you find lenders amenable to your situation. Even if you're a borrower who wouldn't have any trouble getting a mortgage, a broker will meet with you (in person or virtually), go over loan options, highlight points of comparison and support you in making an informed decision.

• Convenience. Getting a mortgage is a time-intensive process. Even after doing all the due diligence to find the right bank for you, the actual application and loan closing process are intense, with lots of back-and-forth and requests for documents you swore you already provided twice. A mortgage broker will generally handle the paperwork and lender-wrangling on your behalf; a good mortgage broker will save you time and stress.

• Direct connection. If you're working with a loan officer at a bank, you're working with a bank employee. They should be able to address any issues right away. On the other hand, when you're working with a mortgage broker, they may not always be able to influence what goes on at the bank since they don't work for it.

• Potential discounts. While it may feel easiest to go with your existing bank when you're ready to buy a home, it's always a good idea to shop around to find the best mortgage rates. But make your bank one of the options you shop, since many offer discounts to existing customers who use other products or services like credit cards, checking, or savings accounts. For example, if your bank already offers you a low rate and favorable terms, getting a discount on closing costs or paying no origination fee might be enough to tip the scale.

• Fewer fees. Mortgage brokers don't work for free, and if you use one, that adds to the cost of your home loan. Generally, mortgage brokers earn a flat fee equal to 1% to 2% of the total cost of the loan. If you pay this as the borrower, it may be part of your closing costs or rolled into the loan amount. Sometimes the lender will pay the mortgage broker (since, after all, the broker is bringing the lender business). Although that may look less expensive on paper, your lender might build the broker’s fee into the cost of your loan. Mortgage brokers must disclose their fees upfront, so it's something you can ask about when you're looking for a broker. If you're paying the mortgage broker, they cannot receive additional compensation from the lender — either you pay, or the lender does.

• Fewer people to manage. You might be able to cut out a lot of the headaches of the loan process by working with a mortgage broker, but you'll still have to do some research to find a mortgage broker in the first place. You'll want a mortgage broker who works well with you and also with your buyer's agent. If the relationship doesn't go as expected, you can change brokers — but then you're back to square one.

» MORE: See which banks are among our top picks for mortgage lenders

» MORE FOR CANADIAN READERS: Should you use a mortgage broker or a bank?