Considering buying a property? Have you been shopping around for the best deals in a mortgage? Did you know a mortgage broker can get rates from several different mortgage companies without any research, phone calls, emails, etc. on your part? Below, we will show you what a mortgage broker is, the benefits of using one, and why you should consider a broker before signing anything.
What is a Mortgage Broker?
Mortgage brokers are professionals who help connect borrowers with lenders. They are trained to help you find the best possible solution to meet your buying needs. Brokers aren’t a lender or a banker looking to sell you their products. They are experts in selecting these options, just as a personal shopper helps you select the best clothes for you. Tasks they perform include but are not limited to:
- Mortgage brokers help you gather all the documentation you need before applying for loans.
- They can manage the pre-approval process.
- Provide you with a range of options from traditional banks to credit unions and beyond.
- Some mortgage brokers can also help with the underwriting and approval processes.
How Do They Work?
The mortgage broker will begin by gathering all of your financial documentation, such as income, employment history, debts, and assets. Unlike the traditional mortgage process, you will only have to go through the trouble of gathering your paperwork once. The mortgage broker will listen to what you are looking to purchase, your budget, and options such as interest rates, mortgage points, etc. They then go through their pool of lenders to find options that are a good fit for your purchase.
How to Select the Right One
Choosing a mortgage broker is more extensive than conducting a simple web search. You should choose a broker that has experience in the area you are looking to buy. It is also important to realize that each broker uses a different pool of lenders that are available to them. You want to make sure you use a mortgage broker that has the connections to get you the best deal possible.
When interviewing mortgage brokers, it is important to ask the following questions:
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- How does your application process work to make it as easy as possible for me?
- What are you and your team’s experience with purchases like mine?
- What is the best rate you can get for me (an educated guess is fine)?
- How many lending options will you ultimately be able to present me?
- Will I qualify for a loan with low or bad credit (if applicable)?
- How will you be paid for your services?
Why You Should Use a Mortgage Broker
In short, a mortgage broker is on your side. They can save you hours by doing the shopping around for you. A mortgage broker’s job is to represent you and your interests when contacting multiple lenders to get you a variety of financing options. Loan officers work for banks. Mortgage professionals work for their lending institution. Either can only offer you choices from their institution. Depending on your state, mortgage brokers must be licensed and have several lending options from which to choose.
Brokers also help you through every step of your financing processes such as the pre-approval, application, acceptance, and even the closing of the loan. Besides, a mortgage broker becomes the liaison between you and all the others who will be involved in the mortgage process. Their contributions should include banks, escrow officers, title companies, and any others. They even help you coordinate all documentation with your real estate agent for your desired outcome.
Additionally, if you do have low or poor credit, a mortgage broker can help you find other alternatives to your scenario.
How Do They Get Paid?
Mortgage brokers earn their pay fees via a percentage fee. This fee may be paid by yourself or your lender, depending on the mortgage broker themselves. Mortgage brokers are most commonly compensated by lenders, although sometimes the borrowers pay the fee. However, it is never both. The percentage of the loan paid to the broker can range anywhere from 0.5% to 2.75%. The cost of the broker may be added as part of your mortgage payment if you are paying the broker. You may also pay the broker yourself with a one-time payment, which can be beneficial if the rate of pay may is lower than the lender-paid option, so be sure to ask.
To learn more about mortgage brokers and their services, visit the New York State Department of Financial Services.
More on Mortgage Brokers
Shopping for a loan can be worrisome work no matter if it is residential, commercial, or as an investment. You still must apply with a variety of lenders, as well as go through a complex mortgage approval process when you’re on your own. Get an expert to guide you through the process to see if you can get the best rates, or if you don’t have all the time and effort to do so.
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