Using a Mortgage Broker: What You Need to Know
Hiring a mortgage broker comes with many benefits, including being able to view competitive mortgage rates that different banks offer without having to make multiple phone calls. In many cases, brokers can also help consumers obtain a mortgage even if their financial profiles don’t meet some of the guidelines.
The following information will help you better understand what a mortgage broker is and how he or she can help you:
What is a Mortgage Broker?
In short, a mortgage broker acts as the middleman between the bank or mortgage lender and the prospective borrower. When someone wants to take out a mortgage or refinance their home, they often consult with a mortgage broker who then takes down pertinent information, submits it to multiple banks, negotiates the rate and then comes back to the consumer with multiple offers. The broker then helps the consumer decide which offer is best for them.
Before the mortgage broker submits the application to the bank, they’ll normally work out some of the calculations first. They can determine how much a consumer can borrow based on income, asset and debt information, and will help calculate a loan-to-value ratio, a number which is factored in to the final decision.
The mortgage broker takes on many roles, one of them being assisting the potential borrower throughout the process.
How Mortgage Brokers Make Money
Professional mortgage brokers normally get paid one of two ways:
- Loan Fees– Brokers can charge what are known as loan origination fees or broker fees before the loan can be issued. These fees are normally paid upfront as part of the down payment.
- Lender Credits– A lender credit is used for borrowers who wish to take out a no-cost mortgage. The lender pays the broker a fee, known as a credit, that is rolled into the mortgage and increases the consumer’s interest rate.
Do I Need a Mortgage Broker?
Whether or not you need a mortgage broker will depend on your current situation and preferences.
Mortgage brokers effectively do the same job that the banks do. They analyze information and submit documents for approval. They are useful for people who don’t want to go directly to the lender either because their credit history is less than perfect or they don’t want to spend the time and energy sending in multiple applications.
If you feel like it will be uncomfortable for you to ask questions when speaking with a lender, you should seek a mortgage broker to help you obtain a mortgage. Because multiple banks are will be in competition for your business, using a broker might also get you a lower interest rate on your mortgage.