Mortgage brokers have access to multiple lenders and mortgage products. This can help them find better rates and terms on your behalf.
Some mortgage brokers get paid by the lender; others charge their customers a fee that can be either upfront or rolled into the loan. You should understand how each broker charges before selecting them.
Independent Advocacy
Mortgage brokers work with a broad range of lenders (including credit unions, banks and mortgage companies) and have the ability to help you snag a competitive mortgage rate. In addition, they may have connections that can lead to a better deal on fees or closing costs.
A mortgage broker, being a mortgage specialist, is a licensed and regulated financial professional who has a stable of lenders they work with to offer home loans. They will do all the legwork for you by collating all your documents, verifying your income and employment and pulling your credit report. They then apply for mortgages on your behalf with a number of lenders in a short period of time. They will also collaborate with you, the lender, underwriters and your real estate agent to keep the process on track until you close on the loan.
Unlike a bank or credit union loan officer, mortgage brokers are required to work in the borrower’s best interest. This means that a mortgage broker is able to access a wider range of mortgage programs than their employer-based counterparts.
Mortgage brokers intimately know the fees that lenders charge, including application fees, underwriting fees, origination fees and appraisal fees. As such, they can sometimes get lenders to waive these fees for borrowers. They may be able to do so because of the volume of business they bring them or because they can leverage their relationships with a particular lender to get a better deal on your behalf. This is one of the main benefits of working with a mortgage broker. However, some mortgage brokers may prioritize selling loans from lenders that pay the highest commission, so be sure to do your research.
Access to a Wide Range of Lenders
Mortgage brokers can scour the marketplace to provide you with numerous loan options. This can be an advantage, but it also comes with the risk that your broker may only point you to loans where they are most likely to earn a commission. This could result in you finding a loan that isn’t right for your credit situation.
Some mortgage brokers have stables of lenders that specialize in different types of loans, including specialized loans for first-time homebuyers or those involved in property investment. This can be helpful, as some loans require a lender with a more lenient set of lending criteria.
A mortgage broker can also help you complete your financing transaction faster. On your own, you might need to submit multiple applications, which can hurt your credit score. A mortgage broker can work with a wide range of lenders, and can often get the job done within 30 to 45 days.
Before working with a mortgage broker, be sure to ask about their fees. This will allow you to make sure that the broker will be able to provide the best services to you at a competitive rate. A broker’s fee can be paid upfront, or it can be rolled into the cost of your loan. It is common for mortgage brokers to charge fees that are incorporated into the cost of the loan.
Ask your mortgage broker about their compensation structure and how it is determined. This will help you understand whether they are charging you for their services or if they are earning commission from the lenders that they are connecting you with. It is also important to note that some mortgage brokers function as a bank. If this is the case, they might be more inclined to refer you to loans offered by their own company.
Personalized Advice
The role of a mortgage broker involves taking into account the unique financial situation and goals of each borrower. The mortgage broker analyzes income, assets, debt, employment documentation, credit reports and other important data to assess the borrower’s ability to qualify for a mortgage with different lenders.
This customized approach allows the mortgage broker to present borrowers with loan options that best fit their individual needs and budgets. It also helps ensure that borrowers don’t take on a mortgage they can’t afford to pay back or would place them in financial hardship.
Mortgage brokers are familiar with home loan products offered by multiple lenders, and they can help borrowers compare important mortgage factors such as interest rates, fees, terms and credit requirements. However, mortgage brokers may only present loan options from lenders they work with frequently or those they consider “preferred.” This can limit a borrower’s options and potentially lead to higher costs.
Borrowers should always ask their mortgage brokers how they are compensated for their services. This will help them determine whether the mortgage broker has their best interests in mind or is simply aiming for a quick sale. It is especially important to clarify this issue if the mortgage broker is being paid by the lender, as this could indicate a conflict of interest.
A mortgage broker can be particularly beneficial for borrowers who are experiencing difficulties with traditional mortgage lending criteria, such as self-employed borrowers or those with less-than-ideal credit histories. Mortgage brokers are typically familiar with lenders who provide mortgages for non-traditional borrowers and can help find the right financing solution. They can also offer a more streamlined process with less paperwork and confusion than working directly with a lender.
Transparency
As a mortgage broker, your job is to serve as an intermediary between borrowers and lenders. This means you need to be upfront about your fees and what you’re earning in compensation from each lender. Generally, mortgage brokers will charge borrowers anywhere from 1%-2% of the loan value to cover the time and work involved in the process. They will also earn commission from lending institutions for the loans they originate. This money can be paid either directly to the borrower or rolled into the cost of the loan.
Mortgage brokers also intimately know the fees lenders charge, so they may be able to get certain fees waived that you wouldn’t have thought to ask about on your own. This is particularly helpful for borrowers who are self-employed or have unique financial circumstances.
While many borrowers find a mortgage broker helpful, it’s important to understand the advantages and drawbacks of working with one. For example, some lenders don’t work with mortgage brokers, and they could limit your borrowing options. In addition, if you work with a mortgage broker who is on commission, they may be more likely to push for a larger loan than is financially prudent for your needs.
Whether you choose to work with a mortgage broker or go it alone, ensuring that you’re being honest and transparent is the best way to build trust with your customers. Since most communication is done via email, text message and videoconference, it’s even more important to maintain this level of professionalism when handling mortgage contracts online. This will help you avoid any costly mistakes down the road. Moreover, it’s essential to find a broker who is willing to accommodate your preferred communications style.
Communication
Mortgage brokers are typically well-versed in the home loan products that lenders offer. They will also have a general idea of what interest rates are being offered by different lenders on any given day, and they can quickly compare loan offers on your behalf. This saves you the time and energy it would take to do the research yourself.
Mortgage brokering is particularly helpful for borrowers who have unique financial circumstances. They may be self-employed or have inconsistent incomes, or they may have credit issues that prevent them from qualifying for a traditional loan. A mortgage broker can be familiar with lenders that specialize in providing loans for non-traditional borrowers and can help you find the right lender for your specific situation.
However, if your broker is on commission, it’s important to know how that affects their work. If a lender pays the broker a high commission, they might be inclined to refer you to that lender even if it means higher loan terms for you or lower your credit score. This can be a problem because it could cost you money in the long run.
Additionally, mortgage brokers are often aware of the fees that lenders charge, and they can use their knowledge to negotiate with a lender to waive some of these charges. This can save you a lot of money over the life of your mortgage. For example, a broker might be able to get a lender to waive application, appraisal, and origination fees that a bank wouldn’t be willing to do on its own. They can also advise you on other fees that might apply, including hazard insurance. If you’re interested in working with a mortgage broker, make sure to choose one who has the best interests of their clients at heart.
