If you need help in navigating loan options, locating the best interest rates, or dealing with complex borrowing issues, a mortgage broker is able to assist. A mortgage broker can help you match you with the right lender, even though you can search for a home loan by yourself.
Before you go to a large bank, a Credit Union or private lender, here’s some information you should know about working as a mortgage broker.
What is a Mortgage Broker?
A mortgage broker is not a lender and does not finance loans. Instead, they help you find the right lender to suit your needs. Mortgage brokers are financial professionals licensed and regulated who act as an intermediary between borrower/lender.
A broker may have access to more lenders than a direct lender, so you might get a wider range of products and terms. Although working with a broker does not guarantee you get the best deal, you should still compare terms and conditions.
Although brokers can help you save time and money by originating loans, they cannot close your mortgages.
Once you have chosen the right lender, your broker will assist you in compiling your paperwork and sending it to an underwriter. The broker will also order a home appraisal. The mortgage broker will properly prepare for closing day once you have been cleared to close.
What is the Pay for Mortgage Brokers?
The mortgage broker is usually paid by the lender after closing the loan. However, sometimes the borrower pays him at closing. The fee paid to the mortgage broker is usually 1% to 2.2% of your loan amount.
The fees may be added to the loan amount if the borrower pays them. The broker’s commissions are usually included in the cost of the loan when the lender pays. A federal law prohibits mortgage brokers charging hidden fees. You and the lender cannot pay brokers, and affiliate businesses can’t give them kickbacks.
What are the advantages of using a mortgage broker?
- A mortgage broker is able to save buyers time, stress, and manage the entire mortgage process. The broker handles paperwork and coordinates with the relevant parties. This could make it easier to close your loan quicker.
- A broker can help you find different loan types, rates and lenders. A mortgage broker might be able to obtain special rates that are lower then what you would get from a lender.
- A broker can help you reduce or waive mortgage fees. This can result in savings of hundreds to even thousands of dollars.
- A mortgage broker can provide insight into what house you can afford as well as your chances of loan approval.
- Brokers can assist buyers with poor credit and inconsistent income. Brokers often have connections with lenders who will work with non-traditional borrowers. They can help you find the best rates and loans.
- A broker can help you avoid making mistakes by sharing their knowledge of the mortgage industry.
What are the disadvantages of using a mortgage broker?
- A fee may be charged to the broker for a percentage of the loan amount.
- Brokers who are trying to close the most loans quickly in the mortgage industry may not provide excellent service.
- If a borrower fails to do research on mortgage brokers, they could find themselves with an inept broker making home-buying difficult and tedious. It may prove difficult to find a reliable local broker depending on where you live.
- However, a mortgage broker does not guarantee you will get the best deal. Conventional banks may offer better loans to certain borrowers then mortgage brokers.
- Because your loan file is not underwritten in-house by a mortgage broker, mortgage brokers might have less control.
- Brokers can be biased by relationships with lenders. A broker might favor a lender that pays a fee over the one that offers the best deal.
- You may not be able to access certain loan programs if you don’t work with mortgage brokers.
Who should use a mortgage broker?
If:
- You are either too busy to complete the mortgage application or don’t have the patience.
- You don’t have a lot of credit or own your own business and are having trouble finding mortgages that work for you. You might be eligible for loans through a broker.
- A broker would be happy to waive or reduce your mortgage fees.
- If you need help with the loan process, or guidance on how to proceed, we can help.
- You’d like to have access to the network of lenders that brokers offer.
- A mortgage broker can help you negotiate or get a lower interest rate than the advertised rates.
How can you find a good mortgage broker?
You can find the best broker for your homebuying needs by shopping around.
Ask friends, family members and seasoned agents for recommendations; talk to people who have just bought homes; research reviews. When you’re looking through reviews, be sure to evaluate the broker and NOT the brokerage firm.
The third-party reviews consist of ratings and comments that are collected on sites like Google or Yelp. First-party reviews, on the other hand, are collected and displayed on a broker’s website.
Interviewing brokers can help you to find the right mix of personality, professionalism and responsive communication. This can help you get a better idea of the quality of service and flow of the mortgage process.
Ask the broker how often they close on time, and what the broker’s compensation is so that you can compare fees to negotiate. You should also consider how easy each broker connects with you.