Mortgage brokers are licensed professionals who act as intermediaries between mortgage lenders and borrowers. They help the borrowers to connect with lenders that best fit the borrower’s interest-rate requirements and financial situation. A mortgage broker must not be confused with a mortgage banker; the latter provides a mortgage with its own funds and the contract is in line with the bank’s policies.
Mortgage brokers help save your time by doing all the necessary groundwork for you. They assess your situation and come up with the best possible mortgage options to meet your needs. Owing to the nature of their job, mortgage brokers interact with a wide variety of lenders regularly. They can therefore steer you away from lenders who have onerous payment terms hidden in their contracts.
There are various kinds of fees when working with a new lender or taking on a new mortgage. This includes application fees, origination fee and appraisal fee etc. Because of their good rapport with lenders, many times mortgage brokers may be able to get them to waive off some or all of these fees which can save you hundreds or even thousands of dollars.
If you go to a bank, you will be presented with a few home loan programs that adhere to the bank’s own lending policies. This means that you could be missing out on a mortgage program that is most suitable to your needs. But with a mortgage broker your options will not be limited. This is because they have access to the full market and can provide a wider variety of home loan programs for you to choose from enabling you to hit the best possible deal.
If you choose to apply at various lenders yourself, it is not just time consuming but can also lead to a lower credit score. This is because each time you apply at a lender, it results in a hard credit check. And if you do a lot of credit checks in a short time span, it can lower your score. By engaging a broker you can protect your credit score as they usually only require to pull it once.
The best part about engaging a mortgage broker is that the charges are mostly compensated by the lender. Their fee is usually a small percentage of the loan amount, generally between 1% and 2%. The only time you may have to pay fees is when you’re working with a private lender or one who refuses to pay the broker fees. However in those cases the broker will inform you about the potential extra costs in advance.
Even if you are not interested in hearing a testimonial, you must ask this question to check the broker’s response. If there is any hesitation or a sense that they are not comfortable, don’t do business with them. But if they readily provide a name, email or number, it shows that they are confident and has satisfied clients.
The reason you choose a mortgage broker is to have better and wider access to lenders. Hence you must ask about how big a broker’s lender pool is. If the mortgage broker only works with a few lenders, then you shouldn’t waste your time with that broker. Working with a broker only makes sense when you’re trying to rate shop across a wide range of lenders.
You should always go for a broker who asks plenty of questions about your financial goals and history. They should have all important queries such as bank balance, credit score, previously owned homes, incomes and marital status on their fingertips. This is because it is this data through which they will determine your best loan options. If you come across a broker who is only interested in reading you rates, continue your search for a more active and sincere mortgage brokers.
Successful mortgage brokers often have a professional liability insurance that guards them against claims of negligence. Examples of allegations that could be brought against them include inability to safeguard confidential data, mishandling of documents and discriminating against a potential borrower. Having this insurance means that the brokers are professionals who have earned a reputation over years of service in the business.
Mortgage brokers make a profit by connecting lenders with homeowners. This profit comes in the form of points, generally attributed to 1 % per point of your mortgage rate. It is in a broker’s best interest to give you the best rate possible. However, you must inquire about their fees and points to ensure that the deal is best for you and not just the broker. In order to have a clear understanding of the process, you should ask them to present a breakdown of the lending and brokerage fees.
Now that you have enough knowledge about the expertise and functions of a good mortgage broker, you will definitely be able to choose wisely and make good productive use of their skills and experience.