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Many homebuyers have a misconception about where they can obtain financing for their homes. They often believe that the only place to get a mortgage is from a retail bank and that what the bank offers is their only option. However, this is simply not true. A mortgage broker provides a very different approach to mortgages. Mortgage brokers typically offer much more flexibility and customized solutions to fit specific borrower needs. In this article, I will explain some key differences between mortgage brokers and retail banks and why mortgage brokers are often the better solution.
Let’s start with the major difference between brokers and retail banks. Retail banks tend to fit their loan products into a "one-size-fits-all" model. They usually lack the flexibility to offer a wide array of loan options, which limits whom they can lend to. The types of loans retail banks offer are usually conventional and government-backed loans, such as FHA, USDA, and VA loans. As a broker, we can offer those loans and many more.
Some examples of loan products that brokers can provide— which retail banks may not— include Bank Statement loans and DSCR loans. Bank Statement Loans: These loans are a great way to help self-employed borrowers who do not show a lot of income on their tax returns qualify for a mortgage. Instead of relying on tax returns, these loans consider the borrower’s credit score and bank statements (or other financial accounts) to determine eligibility. DSCR (Debt Service Coverage Ratio) Loans: These loans are designed for borrowers looking to purchase investment properties. Instead of analyzing personal income, lenders evaluate the borrower’s credit score and compare the appraised rental income to the monthly costs associated with the property (mortgage payments, taxes, and insurance) to determine qualification. In addition to unique loan products like the ones listed above, brokers have more flexibility regarding credit scores, debt-to-income (DTI) ratios, and down payment options. Retail banks have rigid standards that they will not adjust. Brokers, however, have access to a variety of lenders, some of whom have more lenient qualification requirements. This allows borrowers who may have less-than-ideal credit, limited income, or smaller down payments to still have a chance at homeownership.
Another unique benefit that brokers offer is customizable loan terms to fit each borrower’s budget and financial goals. Unlike retail banks, which typically only offer 15-, 20-, or 30-year mortgage terms, brokers can provide nonstandard terms such as 19-, 22-, or 28-year mortgages— whatever best suits the borrower’s needs. This flexibility is especially beneficial for homeowners looking to refinance. For example, if a borrower has a 30-year mortgage and wants to refinance after two years for a better rate, they don’t have to restart with another 30-year loan (which would essentially add two extra years of payments). Instead, they can refinance into a 28-year mortgage, keeping their payoff schedule on track while still benefiting from the new rate. This level of customization allows brokers to tailor solutions for every unique borrower situation.
Finally, another major advantage brokers have over retail banks is availability. Try contacting your bank at 6 p.m. on a Sunday—you’ll likely have to leave a voicemail and wait until the next business day for a response. Brokers, on the other hand, do not work typical 9-to-5 hours. We are available to assist clients at any time, any day of the week. This flexibility is crucial for homebuyers, many of whom work standard business hours that coincide with retail bank hours. Why should they have to rush through reviewing documents or asking important questions just to get back to work? As mortgage professionals, it is our responsibility to ensure borrowers are getting the right loan product for their needs, educating them on the process, and addressing all their concerns. If borrowers are forced to squeeze in meetings during their busy workdays, they may not have time to fully understand their options or ask all the questions they need to. Brokers understand that borrowers may prefer to discuss their mortgage options in the evening after work, which is why we are always available when they need us.
Mortgage brokers offer significantly more flexibility than retail banks. We have a wider range of loan products, allowing us to assist borrowers that retail banks might turn away. We can tailor loan terms to meet each borrower’s exact financial goals. Most importantly, we are available beyond regular business hours to ensure our clients receive the support they need. If you are looking for a mortgage solution that works around your needs—not the bank’s—working with a mortgage broker is the best choice.
