Where do I go for a mortgage loan?
When a home buyer thinks of getting pre-qualified for a mortgage loan for a home purchase, the first thought in his or her mind is going to the local bank. However, the local bank might not be the best choice for you. There are other options on where to apply for a mortgage loans. Some of the choices a mortgage loan borrower has are credit unions, mortgage bankers, and mortgage brokers. We will cover the advantages and disadvantages of the various mortgage companies.
Going to a bank for your mortgage loan
One of the major advantages of going to your local bank to apply for your mortgage application is the convenience of having a brick and mortar place to just drop off your mortgage documents instead of dealing with emails and faxes with mortgage companies that are a distance away or out of state mortgage companies. However, the disadvantages far outweight the advantages in dealing with banks than mortgage companies like credit unions, mortgage bankers, and mortgage brokers.
Mortgage Rates And Banks
Banks normally have the highest mortgage rates for residential mortgage loans. One of the reasons why banks have higher mortgage rates than other mortgage companies is because of their overhead costs.
Banks are exempt from disclosing yield spread premium and are exempt from licensing requirements
Banks do not have to disclose all costs like mortgage brokers need to. The politicians have favored banks and have exempted banks from disclosing yield spread premiums and other costs that is associated with originating mortgage loans. Banks are also exempt from licensing requirements for their mortgage loan originators. A bank’s mortgage loan originator does not have to licensed with the state’s department of financial regulation. Again, due to the heavy lobby of bankers in Washington, banks have gotten away with many of the new rules and regulations that was implemented after the real estate and banking collapse of 2008.
Banks can take up to 4 months for mortgage approvals
Another major disadvantage of dealing with a mortgage loan originator from a bank is that they only have banker’s hours and very rarily can you contact your mortgage loan originator after hours or on weekends unlike mortgage bankers and mortgage brokers.
Banks have the worst track record in processing and underwriting mortgage loans. Many banks have 6 month turnaround times from the time a mortgage loan borrower submits their signed mortgage application to the time they issue a clear to close the mortgage loan.
Banks have the strictest mortgage lending requirements and criteria
If you have had prior bad credit and have had credit bumps along the road, a bank will not be your best choice in trying to get a mortgage loan approved. Most banks have minimum credit score requirements of 640 FICO. They will deny your mortgage loan application if you have had a late payment in the past 12 months. Banks will deny your mortgage application if you had a single late payment after you filed bankruptcy and/or had a foreclosure. Banks debt to income ratio mortgage lending requirement is normally set at 40% where mortgage brokers have wholesale correspondent lenders that can have up to 56.9% debt to income ratio requirements.
Banks And Lender Overlays
Banks are known to have many overlays for FHA and conventional loans. If you got denied a mortgage loan from a bank, no worries. Consult with a mortgage broker and he or she will be able to help you.