Are you trying to decide between using a direct bank or a home loan broker? A broker will shop your loan application around to dozens of wholesale lenders in order to get you the best rate and lowest costs, while a bank will only offer their own loan products. Brokers typically offer more competitive rates and terms while also helping you close faster since they are used to working with multiple lenders at once. For most Florida home buyers, a broker is the best option.
What Is A Home Loan Broker?
A home loan broker is an independent agent, licensed as a mortgage originator, who acts as an intermediary between you and wholesale mortgage lenders. Rather than funding your homebuying process, brokers assess your application needs and shop your loan request from their extensive lender network, looking for the most competitive rates and terms.
If you are purchasing a home in the Sunshine State, getting the right financing is as important as finding the perfect house. But when it comes to getting your mortgage pre-approval, you are faced with an important decision. Should you visit the bank or go through a home loan broker?
At Future Home Loans, we strive to help you make an educated decision. As a veteran-owned brokerage based here in Florida, we have seen the difference it makes when buyers know their options and are able to save thousands of dollars by doing so.
Give us a chance to share the difference between a broker and a bank, so you can get the best mortgage rate for your future home.
Broker vs. Bank Comparison
Here is a brief comparison of the main characteristics of the largest home finance providers:
| Feature | Home Loan Broker | Traditional Bank |
| Loan Options | Hundreds of products from dozens of lenders. | Limited to their own proprietary loan products. |
| Interest Rates | Access to discounted wholesale rates. | Standard retail rates. |
| Closing Speed | Typically much faster (averaging 14-21 days). | Can take 30 to 45+ days due to bureaucracy. |
| Flexibility | High. Brokers can switch lenders if issues arise. | Low. If their underwriter says no, your loan is denied. |
| Fees | Often lower or waived (e.g., no lender fees for Veterans). | Often charge high origination and processing fees. |
What Is a Home Loan Broker?
A broker works for you, not the lender.
When working with a broker, you apply with only one person. That broker then shops your loan file around to several different lenders. Because brokers can send multiple files to one lender, many of them can secure wholesale interest rates that most lenders don’t advertise to the general public.
Whether you want to apply for FHA Loans, VA Loans, USDA Loans, or simply conventional Loans, a broker will look for the best deals on the market. If the underwriting department of a particular lender is too slow or too strict, your broker will just turn to another lender instead of making you apply several times.
What Is a Bank Mortgage?
A bank works for itself and lends its own money.
When you go in and visit any big national banks or a local credit union, they’re actually face-to-face lenders. The loan officer in front of you is an employee of the institutions he or she works for. Meaning their lending you based on a loan product that only their specific bank offers.
If their adjustable-rate mortgage is overpriced, or their fixed-rate mortgage is too prescriptive, then they can’t give you the competing product. If you are not their ideal candidate, they will say no.
Mortgage Broker vs. Retail Lender: Understanding the Difference
Many people tend to conflate brokers with retail lenders. A retail lender is a company that only originates its own mortgages for sale to investors. Thus, even the best mortgage lenders in Florida, which are retail lenders, are limited in their offerings by the fact that they only sell their own loans. The same goes for banks.
A broker, on the other hand, is completely independent. We work with over 30 lenders and if one of them has a special rate on refinance loans, we will use them. If another one is having a special aggressive rate for someone needing mortgage insurance for their first house, we will use them. This is why we are referred to as the deal savers when buyers are being denied by the retail lenders.
Why Mortgage Brokers Often Find Better Rates
Brokers have lower overhead and access to wholesale pricing.
The Consumer Financial Protection Bureau reports that homeowners who do not shop around for mortgages can expect to pay thousands of dollars more in interest over the life of their loan. Studies performed by Freddie Mac have shown that shopping around for a mortgage can lead to substantially lower rates than going with the first lender you meet.
Here is why a broker typically wins on rate:
- Wholesale Pricing: Lenders will give brokers a better rate since the broker does the upfront work processing the loan, which saves the lender time and money.
- Lower Margins: Banks make their profits by having high overhead (think skyscrapers, billboards, and thousands of salary-paying jobs), which gets passed on to you in the form of higher rates and closing costs.
- Instant Shopping: With a broker, you get a shopping competition among lenders for your business. The broker does the work of shopping, getting competitive quotes, and presenting them to you.
To learn more about how this wholesale structure benefits you, read our in-depth look into why smart home buyers choose brokers over big banks.
Situations Where a Bank May Be Better
Are banks ever the right choice? Sometimes, yes.
We believe in giving honest and transparent advice. There are certain situations when you have to deal with banks directly. For example, if you have millions of dollars in assets managed by a private bank, this institution might give your portfolio a “portfolio loan,” which is a large amount of money that can be used to pay off some other debts. The interest rate on this loan is significantly lower than usual ones as a sign of gratitude for keeping your assets at this bank.
In addition, if you need a very small personal loan or just need basic checking account services, a local credit union may be best. However, for almost any standard home purchase, you will save money with a mortgage broker.
Florida-Specific Mortgage Considerations
Our real estate market requires local expertise.
Financing a home in the Sunshine State is more different than buying a home in the Midwest. When it comes to finding mortgage brokers in the Florida area, you need to find people who have a working knowledge of the local markets from Jacksonville and Pensacola to Orlando, Tampa and Miami.
Here’s what to expect when dealing with the Florida home market.
- Hurricane Insurance & Escrow. Florida homeowners’ insurance premiums are higher than the national average. Your broker should be able to accurately estimate these costs on your behalf so that they can be properly allocated on your loan estimate, thus funding your escrow account correctly. An out-of-state lender might underestimate your insurance costs, leaving you surprised by a large payment at settlement.
- Property Taxes. Depending on the county in which you buy your property (Sarasota, Naples, Gainesville, or another), property taxes might be high, moderate, or low. A local broker will be able to incorporate any tax amount in your DTI (Debt-to-Income) ratio so that it is considered when analyzing your loan application.
- Condo Financing. If you are buying a condominium in Fort Lauderdale, St. Petersburg, or another Florida city, a local broker will assist you better in choosing between a warrantable and a non-warrantable condo. Fannie Mae and HUD have specific requirements for condos, including reserves for replacements and safety standards.
- Down Payment Assistance. Finally, local brokers are likely to be more familiar with the Florida Housing Finance Corporation programs that offer assistance with down payment options for first-time homebuyers.
Common Mistakes Homebuyers Make
Avoid these costly financing errors before closing day.
As experts in the field, we have seen many people make mistakes that could jeopardize their loan approval. Here are three things that people tend to do that could hurt their chances:
- Opening New Credit Lines: Do not open new lines of credit in order to finance new purchases or to buy a vehicle while in the process of getting your mortgage approved. This can lower your FICO score dramatically and can cause a lower DTI, which can throw your loan approval off.
- Changing Jobs: Lenders like to see that you have a stable job throughout the process of getting your loan approved. If you change jobs shortly before closing, this could cause complications.
- Depositing Large Amounts of Cash: Many underwriters look at large amounts of cash being deposited into your account with great scrutiny. It is best to keep your cash in a standard bank account.
Checklist Before Choosing a Mortgage
Gather your documents to ensure a smooth, rapid closing.
Before you compare FHA mortgage lenders in Florida or apply for a conventional loan, have this information available for your broker:
- ID and Social Security Number: For credit pulls or identity verification.
- 30 days of pay stubs: This shows the underwriter your income.
- Two years of W-2s and tax returns: This shows the underwriter your earnings history.
- Two months of bank statements: This is to show proof of your down payment and closing costs.
- Current debt: This is your car loans, student loans, and credit cards.
Having this ready allows a broker to provide an accurate, reliable pre-approval on the spot.
Ending Remarks
When it comes to the bottom line, the choice between a bank and a home loan broker is ultimately a choice between paying more for the comfort of the known or less for the uncertainty of the unknown over the next 15-30 years. But when it comes to value and time, however, the playing field becomes decidedly uneven. It is difficult to argue that even the most aggressive bank can provide the same combination of options, speed and wholesale rates as an independent mortgage broker.
By working with a broker, you tap into the power of the open market. You get the benefit of an experienced negotiator who will smooth your path through the underwriting process, shop the loan market for the best deal, and make sure you never pay more than necessary for your mortgage.
So, if you’re looking to save thousands on the mortgage for your Florida home, contact us today and let our veteran team identify the best mortgage options for your family.
Frequently Asked Questions
Are mortgage brokers in Florida more expensive?
No. In fact, brokers are usually cheaper. The reason is that our compensation is paid directly by the lender and we operate on a wholesale level, allowing us to give you a better APR and fewer out-of-pocket charges than a traditional retail bank would be able to.
Do brokers handle VA and FHA loans?
Yes, we do. We are a government loan-backed company. Being a veteran-owned company, we are very proud to be able to offer VA loans to other veterans with no lender fees. We also do a lot of FHA and USDA loans.
What credit score do I need for a house in Florida?
It is different for every type of loan since it depends on the requirements set by a company you have applied to. For instance, for an FHA mortgage, there is a chance to get a loan with a credit score of 580 as a minimum. When it comes to a conventional mortgage, the FICO score should be at least 620, while those who have equity or make a big down payment may see more leniency from the underwriter.
How do HOA fees affect my mortgage approval?
HOA fees are a common thing in Florida, and lenders have to factor those in with your debt-to-income ratio. If your HOA fees are expensive, you can expect to have a lower loan amount than you might otherwise have had.
Can a broker help me if I have been denied by a bank?
Yes! We specialize in it; that’s how we became known as the “deal savers.” Big banks have overlays, which are restrictions on their lending criteria, but since we work with more than 30 different lenders, we can typically find a lender that has less restrictive requirements for your particular situation.