You found a perfect new house or apartment to maintain yourself and now you need a mortgage to buy it. But how did this process begin, can you be sure you did it right? Should you use a mortgage broker to get a home loan or go straight to the bank? What exactly are mortgage brokers? How are they different from bank loan officers or financial advisers? Here are some answers to important questions and reasons for using or not using a mortgage broker.
What does a mortgage broker do?
A mortgage broker is essentially an intermediary between you and a potential lender who will issue your home loan. Your broker can compile a set of mortgage options from multiple banks on your behalf and offer you the best available terms and interest rates based on your specific needs. On the other hand, the bank will design and provide a single rate based on your situation. The bank may offer the lowest rate, but you can do additional research yourself and compare it with other options.
Your mortgage broker will take other actions on your behalf, such as verifying your income and employment. They will use all the information and documents you get to apply for loans from multiple lenders while working hard to find a new mortgage that works best for you. For banks, if you have deposited in that particular institution, they may have archived all your financial information, which will expedite the qualification process.
Once your mortgage broker has found the best lender for you and your new home, they will contact the bank’s underwriting department, the property company and your real estate agent to handle all the details before and after the deadline. Sounds like a piece of cake, right?
How do mortgage brokers get paid?
Like most professionals in this industry, mortgage brokers also get paid in the form of commissions. This is usually based on a percentage of the total loan. Commissions are usually paid by the borrower at checkout.
What is the benefit?
We already mentioned what mortgage brokers do and how they get paid, but what are they the real advantage of using one? Often, mortgage brokers compare the mortgage rates of a large number of banks and lenders immediately, so you usually get more options for loans that work with mortgage brokers. Sometimes, a mortgage broker may be the only option for someone who has difficulty loaning or qualifying.
What’s the trap?
While hiring a mortgage broker may be easy, there are some pitfalls to keep in mind. Due to the way mortgage brokers get compensated, you always have the possibility of being overcharged through them instead of going directly to the bank. Working directly with a bank rather than with a mortgage broker can also give you a more attractive low interest rate loan.
So when you’re ready to buy the perfect new home, apartment or condominium, be sure to consider your choice to work directly with a bank to get a home loan or work with a mortgage broker to develop a more targeted approach. Either way, make sure you do your task, keep your finances organized, and understand your options.