Banks are often limited with the types of loans they can originate. But their fees and closing costs are usually the lowest. Mortgage lenders sometimes have regional retail offices. They do have a variety of home loan programs that exceed what most banks can deliver. A mortgage broker can shop a lot for you if that broker is connected to enough different lenders.
Banks and Loan Officers
Banking at one bank for awhile is no guarantee of your getting special treatment. When it comes to mortgages, banks have to comply with mortgage secondary market guidelines. If you go that route because you are confident of your credit and income credentials, check with that bank to determine if they have at least an FHA program available. Otherwise you will be forced into a large downpayment unless you pay high monthly PMI payments.
Mortgage Lenders
Some mortgage lenders have small local retail offices. Country Wide, Bank One, Wells Fargo, and others have a variety of deals available, including government guaranteed VA and FHA loans. However, they do not have many locations outside of larger metropolitan areas. Avoid S & L's that don't offer government home loans as well as any office that cannot offer a wide variety of mortgage programs.
Mortgage Brokers
An experienced mortgage broker can help you present the best possible profile to a lender. The application process is through the broker. That broker can shop your one application file to many lenders simultaneously. So if one lender doesn't approve your application according to your wants and needs, you won't have to start the application process all over again with another lender.
A good mortgage broker acts as a consultant for you. He or she is not an employee of any bank or mortgage lender. Mortgage brokers are independently contracted with several lenders. Your task is to make sure that broker has lots of horses, including government guaranteed loans, in the stable! While you're at it, go over fees and how he or she gets paid.
An experienced mortgage broker working out of home or independently from a small office could be a good choice, if that broker has several lending options. That person gets a larger percentage of the commission, or all of it, for your loan. By not sharing with “the house”, he or she can charge less and still get paid well.
Application Basics
Part of the application file, that contains several papers for you to sign, is the GFE, or good faith estimate. Make sure you get one. It is an estimate of your fees. It is not final. If you are applying for more than one type of loan from a mortgage broker, ask for one on each type. Government guaranteed loans, VA, FHA, and USDA, have additional documents for the application file, and GFE amounts will be different. Many mortgage brokers do VA and FHA loans now. But few know about USDA.
Make sure you have copies of two years worth of income documentation for the application. There will be other items needed from you, and the loan originator will let you know about them. You can be candid with most mortgage brokers. An independent mortgage broker knows what can be done to get your loan approved. Consumers can't keep up with constantly changing loan guidelines.
In any case, don't take an application home to fill out on your own. Let a professional who knows the procedural details help you with that. Cooperate quickly with whomever is taking your documented information. Mortgage application files cannot be reviewed for approval until they are complete.
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