Should you consider using a mortgage broker when buying a house?
When you are looking to buy a new house, you are usually trying to find a perfect mortgage loan for the property. Moreover, finding a perfect mortgage loan that fits your financial needs and even your lifestyle is a big job. Finding a good deal can mean that you can receive huge savings on interest over the loan’s life.
Pros of Using a Mortgage Broker
In all, shopping around for a perfect loan can be tedious, time-consuming, and sometimes even frustrating. In such a case, the best bet would be to use a mortgage broker during the property buying process.
First of all, mortgage brokers know the ins and outs of the property buying process. Thus, the potential borrower can save time and even money. They do not have to conduct independent research on what loans are most fitting to them especially if looking for loans is not their speciality (which in majority client’s cases it isn’t). Secondly, mortgage brokers have access to a variety of loans. Hence, while brokers explain the pros and cons of the different loans, they can also significantly help clients to narrow down the best option.
In all, if you are hoping to get a little help with the tedious nature of finding a perfect loan for your property, mortgage brokers may be the answer you are looking for!
What do mortgage brokers do?
Essentially, mortgage brokers do the loan shopping for the client. They are independent professionals who work with multiple lenders. This way, they present to their clients a wide variety of property financing options. Furthermore, mortgage brokers act as liaisons between the client and all the other professionals involved in the mortgage process. This list of professionals include and is not limited to the following: escrow officers, title companies, and others. Mortgage brokers can additionally work with the borrower’s real estate agent for a desired outcome.
Loan officers work for banks usually. They must be licensed to work with several lenders so that their clients can potentially find better deals. They help a borrower through each step of the financing process–starting out from pre-approval to closing of the loan. Also, if the borrower is going through financial hardships, the broker can help find an alternative loan.
How to do mortgage brokers get paid?
Overall, mortgage brokers only make money when their client gets the deal. They usually charge a fee ranging from 1-2% of the loan amount. This fee is paid by the borrower, the lender or even the borrower’s loan’s cost. If the broker decides to charge other fees, the broker must disclose and itemize the fee.
A mortgage broker should be able to elaborate about the different fees they charged to their client(s). Additionally, the Dodd-Frank Act prevents the broker from mixing their pay with the home loan interest rate.
If you choose to use a mortgage broker, use a loan officer at a bank, or even conduct independent research to look for a loan, you will most likely run into fees that they must worry about. Needless to say, brokers can sometimes get the lender to waive some of their fees. In other words, you–the borrower–are less likely to pay higher fees if you use a mortgage broker rather than directly go to a lender.
Cons of Using a Mortgage Broker
Although there are times that using a broker is an amazing idea. However, there are also instances that using banks can be much better for the borrower.
For instance, if you have a great, healthy relationship with your bank (meaning that you’re a regular customer), you might just receive better terms and interest rates for your potential property. This holds true especially if you already qualify for client services. This means that if you already have at least $500,000 in liquid assets, you can receive better terms by approaching a bank’s private client services. Additionally, banks can sometimes be a better option to get a loan faster if you meet the aforementioned caveats.
Also, there may be instances in which mortgage brokers may steer you towards a certain lender to work closely with the lender. This usually happens when the mortgage broker wants to bolster their past history and relationship with the lender. The broker, concerned with receiving a high commission, may not have your best interest in mind.
Furthermore, not all brokers are created equal. In other words, not all brokers have the same skillset. Therefore, some brokers may not be knowledgeable of all the deals and options available for the borrower.
Final thought
It is important for you–the borrower–to conduct independent research as to what is the best option for you. You must research whether it is best for you to find a loan perfect for you independently, through a mortgage broker, or through a bank.
Also, recent home buyers and realtors may just be able to steer you towards a broker who can get you better rates.
Ultimately, it doesn’t hurt to see what your own financial institution can do for you and find out what a mortgage broker has to offer. Conducting independent research never hurts especially when you’re about to make a big decision about mortgages. Before making a decision, I advise you to shop around a little. Find out what works for you. Additionally, know that you can contact us for a free consultation and for more information regarding loans at (818) 322-5626 or (818) 3CA-Loan. Furthermore, do not hesitate to email us at rajiv@3caloan.com.
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