Homebuyers who are seeking a mortgage often meet with several lenders in hopes of securing the best rate and most favorable terms on their home loan. This can be a time-consuming process that is difficult for inexperienced buyers to understand, so many people enlist the services of a mortgage broker to assist in the borrowing process. Here are s some advantages and disadvantages of working with a mortgage broker
What Is A Mortgage Broker?
A mortgage broker is a licensed financial professional who serves as a bridge between borrowers and lenders. They help people who are buying a home find the best lender to suit their needs. Although they originate loans, they do not close or fund them; instead, they guide borrowers to the right products and institutions for their situations. They work in conjunction with lenders, underwriters, title companies and real estate agents to help borrowers throughout the entire purchasing process.
The Advantages Of Working With A Mortgage Broker
Here is a look at some of the main advantages of working with a mortgage broker when purchasing a home.
They Offer A Range Of Loan Options
Most mortgage brokers work with several different lenders. Some of these may be traditional banks, while others are lenders that are only available through licensed brokerages. This gives borrowers more options when it comes to their home loan, thereby raising the chances that they will find interest rates and terms that will work well for them.
They May Have Access To Lower Rates
Mortgage brokers often have access to wholesale rates on home loans due to the volume of business they generate. The rates may be lower than the retail interest rates being offered at a borrower’s bank, which can add up to significant savings over the lifetime of the loan.
They May Be Able To Help You Manage Your Fees
There are several fees involved in taking out a mortgage and working with a new lender. From application fees and origination fees to appraisal fees, these can add up quickly and take borrowers by surprise. Mortgage brokers can sometimes convince lenders to waive some or all of these fees, which could amount to savings of hundreds or thousands of dollars. You can ask your broker for a breakdown of the fees to ensure these charges are fair.
They Have Market Expertise
Working with a mortgage broker gives borrowers access to a valuable source of expertise in the home-buying and refinancing process. Many borrowers are unfamiliar with the mortgage process, and brokers draw on their industry experience to explain mortgage solutions to their customers and guide them toward the best options. Their knowledge of the current housing and lending markets can be very beneficial, and they can advise on the most appropriate loans for borrowers with unique circumstances, such as a lower credit score or income.
It Reduces Paperwork
Home buyers who have the time to shop around at different lenders for the right mortgage often find themselves facing piles of paperwork that need to be completed. However, those who work with a mortgage broker will only need to submit a single application for a new loan rather than filling out several applications and furnishing multiple copies of financial statements to various lenders.
The Disadvantages Of Working With A Mortgage Broker
Here are a few points to keep in mind about working with a mortgage broker.
There May Be A Fee
Some mortgage brokers charge a fee to the buyer, while others are paid by the lender. In cases where the fee is covered by the lender, it is important to ensure that you are not being steered toward a more expensive loan because it comes with a higher commission for the broker.
In cases where you pay the fee, it is important to calculate that into your mortgage costs when determining whether you are getting a good deal. Many people find that the savings over the lifetime of the loan outweigh the broker’s fee, but it is important to settle all fee issues before moving forward with a broker or signing anything.
Brokers Might Have Less Control
Once your loan file is being processed, it is out of the hands of your broker. This means that you may have less control over how quickly the loan moves forward than you would if you obtained it from a banker offering an in-house loan product.
You Need To Choose Your Broker Carefully
Most brokers have their clients’ best interests in mind and will work hard to secure for them the best loan product possible. However, some brokers are better than others, so it is important to perform due diligence and choose who you work with carefully. Consider asking friends, family members or real estate agents for the names of reputable mortgage brokers who they have worked with in the past and interview a few potential brokers before making your decision
Reach Out For More Info On Working With A Mortgage Broker
If you are in the market for a new home, get in touch with the experienced mortgage brokers at MyLendingPal to review your options and choose the ideal loan for you.