When you decide to purchase a home, it is a good idea to contact a professional agent. A mortgage broker is necessary in order to make it possible to purchase such a substantial home.
Instead of going straight to the bank to apply for and get a mortgage, it is better to work with a specialist mortgage broker.
A mortgage broker can help you find the best interest rate and terms for your situation, rather than offering one rate and set of terms like banks.
What does a broker have to offer?
The mortgage broker acts as a middleman between you, the lender and you to obtain a loan to finance your home purchase. These professionals will search for the best mortgage at the right interest rate and terms to suit your financial situation.
It can be very time-consuming to shop around for different lenders. Mortgage brokers can help you save time and money by negotiating lower interest rates.
What exactly does a broker do?
After you have agreed to let your broker find the best terms and mortgage rate for you, you will need to provide a number of documents. These documents will include a letter of recommendation from your employer, income statement, credit report and a list containing your assets.
These documents will be used by your mortgage broker to determine your ability to pay a mortgage and what rate you are eligible for. This is the exact same process as a retail bank.
Your mortgage broker will be better equipped to help you determine the type of loan or package that would best suit your needs after reviewing all documents.
This could include determining the appropriate loan amount and the loan-to-value ratio. (A comparison between the loan’s value and the property’s value).
Brokers take the guesswork out of the application process
Mortgage applications can be complicated. Your broker will help you to clarify all details and make sure that everything is explained clearly. The broker will approach several lenders, but only one mortgage application will be required.
After all paperwork has been completed and is in full, your broker will contact multiple lenders to compare rates and terms. This is the main benefit of using mortgage brokers as they can connect with many lenders and banks in their network.
Conventional retail banks’ loan officers are not able to offer interest rates or loan programs.
This will significantly decrease the chances of you being able find all other options. Your mortgage broker will help you approach multiple lenders simultaneously, so that you don’t have to apply for mortgages with different banks.
Your mortgage broker will help you find the best interest rate for you. Your mortgage broker should contact lenders who offer these terms if you are unable to afford a 5% downpayment on a 30-year fixed rate mortgage.
Note that brokers may have different access to lenders within their networks. Brokers will need to be approved before they can work with each lender. The more contacts a mortgage broker has the better.
What is the cost to use their services?
Mortgage brokers work independently, unlike loan officers who work for retail banks. They must be licensed as such. While they are required to receive payment for their services, the source of this payment can be either from you or from the lender.
The lender that has extended the loan to you will usually pay the fees more often. The fee is usually 1% to 2% of the total loan amount.
This fee can be paid upfront or included in the loan payments. A lender credit is a loan that mortgage brokers offer at no cost. This will increase your interest rate but eliminate any out-of pocket costs.
The lender must disclose all fees upfront. Each fee should be detailed and explained to you.
The Dodd-Frank Act was implemented recently to regulate how mortgage brokers get paid, and how such fees must be communicated with borrowers. The Dodd-Frank Act states that mortgage brokers can’t charge hidden fees or include their payment in the interest rate for your loan.
Brokers cannot be paid to refer you to an affiliate business. They also can’t collect payments from the borrower or the lender. Your broker will not be paid unless the deal is closed successfully if upfront fees weren’t paid.
Fees can vary depending on the amount of the loan and other details. It is important to ask questions before you agree to work with a particular mortgage broker.
Can brokers help me get a better rate and price for my mortgage?
A mortgage broker’s job is to compare rates with different lenders in order to find the best rate. This contrasts sharply with a retail bank which will only offer a rate they can afford.
Brokers are more likely to be able to negotiate a lower mortgage rate than banks because they shop around with multiple lenders.