It is tough to start looking into a home loan without hearing someone mention a mortgage broker. Some will have positive comments and encourage a person to use a broker. Others have some reservations about working with a broker as opposed to independently seeking out home loan options. Armed with more information, a consumer can make a decision as to whether or not a broker is the best option for their specific situation.
What is a Mortgage Broker?
A mortgage broker can be seen as a mediator between the potential homeowner and the lenders. The broker researches the various loan options and presents them to the customer for their approval. This means getting several opportunities for a loan all at the same time. Instead of shopping around with different banks and lenders, the customer depends on the broker to do a lot of the legwork. There are advantages of mortgage brokers, which are worth looking into.
In addition, mortgage brokers are real estate financing professionals who bring together borrowers and lenders during mortgage transaction. Their prime function is to become intermediary between consumers and lenders as well as help consumers to understand variety of options of home loan features.
The person who represents you, as a potential consumer, to the home loan lender is a broker. It is the brokers job to handle the paper work on your behalf and conduct the market research to ensure you get the best deal.
Very often you could land up dealing with what is known in the trade as a sunshine broker an unscrupulous person who promises you a fantastic rate but forgets to tell you that there are a number of fees that have to be factored in still. When you finally add up your account, you may be in for a nasty shock!
Fortunately, as the market has evolved, a system of ethical brokers has also developed along with it. There is a system of brokers called Upfront Mortgage Brokers who work within a highly evolved code of ethics. They will ensure that every fee or payment is listed out on paper for you to compare and take an informed decision. You may initially feel that the fees that the mortgage broker is charging are high, but you can be sure that there will be no surprises at all.
Actually, the brokers fees may depend on the amount of work he anticipates to do on your behalf. If you have a bad credit record or are short of some documents, he will probably have to exert himself more and will charge higher. But, and this is important, the charges will be stated upfront.
Yet another reason for using a mortgage broker relates to his knowing the various niche markets that you would otherwise never be able to find out. I know of a couple who were unable to raise enough mortgage, till the broker discovered that the wife was a doctor and was able to get them a plan that provided for 100% mortgage for doctors!
Besides this, the mortgage broker scores over the sunshine broker in another important manner. The upfront mortgage broker is able to get discounts from the actual lenders due to the volume of business he transacts with them. This discount he is duty bound to pass on to you directly. A sunshine broker would also be negotiating discounts, but you now know where they would go.
How Can a Person Benefit From Working With a Broker?
Imagine making multiple phone calls or filling out multiple forms online to try to get a few home loan quotes. It takes time to work with each lender individually. With a broker, the bulk of the work doesn’t depend on the customer. It is the broker that handles the research and comes up with all the different loan options. Saving time tends to be one of the most important benefits.
Aside from saving time, it is possible to save money by using a broker. There are all types of deals available to people that know what to look for. Because most people only go through the process of purchasing a home a few times in a lifetime, they don’t have the skills or experience necessary to look for special financing opportunities. A broker is an expert in all things revolving around mortgages and tends to have insider knowledge of programs and discounts that customers can take advantage of.
Are There Alternatives to Working With a Broker?
Some consumers are hesitant to work with brokers because of the way they are paid. In some situations, a broker is given a commission or bonus by getting customers to take certain loans. This is not always the case, but it can cause some concern in people that don’t know a lot about how specific brokers are paid.
The alternative to working with a broker is having the potential homebuyer take over the responsibility of searching for the best home loan and the best interest rates. Anyone can talk to their bank to get a mortgage quote. Anyone can get online and work with different lenders to get more information. In fact, some people do a little bit of research on their own while working with a mortgage broker to ensure they are getting the best deal.