So You Need A Loan, But You Don’t Know Where To Start? Have You Thought Of Using A Middle Man To Do Some Of The Hard Work For You?
Use A Mortgage Broker To Find The Best Loan For You And Your Needs!
These 5 Questions Can Reveal A Lot About A Mortgage Broker
A mortgage broker is an independent contractor who acts as a middleman between borrowers and lenders. A good mortgage broker will be able to check available loans from a variety of lenders. They should be able to locate a mortgage which best suits the needs of each particular client’s differing needs. A good mortgage broker will assist a borrower by locating the best available mortgage which meets the borrower's specific needs and circumstances. The broker is paid a fee, typically a commission based upon the amount borrowed, in return for finding the mortgage. The good news is this commission is paid by the lending institution and not by you in added loan costs.
Why Use a Mortgage Broker?
Some people don't want to spend the time and energy seeking out the best mortgage, by contacting a range of lenders, obtaining information about interest rates, fees and closing costs, and comparing available loans. A mortgage broker is the one who will perform those often daunting tasks for you.
Other people may have troubled credit histories, which make it difficult for them to locate reasonably priced credit. Sometimes a mortgage broker will be able to locate a lender who will offer better terms than the person/s can find by looking on their own.
Additionally, some people may want more flexibility in the amount they borrow than is offered by their bank. A mortgage broker may be able to accommodate that desire, by finding them a lender which will, for example, lend them money with a lower down payment than their bank demands.
Yet others may not feel comfortable negotiating aspects of a loan such as the fees and interest rates with lenders, and may prefer to have a mortgage broker perform that task on their behalf.
Although the mortgage broker charges a fee for this service, most borrowers will still save money by using a broker, as the broker is performing services which would otherwise be performed by employees of the lender. Assuming that the mortgage broker's fee is reasonable, the fee is often less than the lender would charge for those services. Assuming the mortgage broker also obtains a better rate than is otherwise available to the borrower, there are again cost savings to the borrower. Both the lender and the borrower each end up happier.
Avoiding Problems
Shop Around - Talk to several mortgage brokers, and compare their fees and experience. This also gives you more ideas of what you want from your mortgage broker. Ask them for references.
Understand your mortgage broker's fees - And get them in writing! A mortgage broker typically obtains a "wholesale" price from a lender, and is free to set any "retail price" at which the loan will be offered to the borrower. The broker's fee will be the difference between the wholesale and retail price of the mortgage. Unless otherwise agreed, a mortgage broker will typically "mark up" or increase the cost of a loan, perhaps by adding points to the loan, in order to get the highest possible fee. Mortgage brokers are more apt to be able to charge excessive fees when they are working with borrowers who are not consulting with other competing brokers, and who have not made any attempts to determine the cost of obtaining a similar loan without the assistance of a broker.
Read your agreement - Make sure that the promises your mortgage broker makes to you are exactly the same as what is written in your contract with the broker. If you are seeking a home mortgage, don't let the mortgage broker mischaracterize the loan as "for business purposes" - any mortgage broker who does that is probably trying to avoid the application of consumer protection laws, or to secure a higher fee.
Be honest in your loan applications - Don't let a mortgage broker misrepresent your financial circumstances or any other information to lenders. The dishonesty will lead back to you as you have to authorize any information provided to the lender by signing off your application.
Verify your "bargain" with other lenders - Go back to your bank or another lender with your mortgage broker's best offer, and see if they will meet or beat that deal. This way the hard work has been done. You have been given the best available loan offer by the broker, and taking this one step on your own to approach your lender directly could mean they may match this offer in order to secure your business within their lending institution. If you are lucky they may even better the offer to make staying with them even more appealing.
Borrow what you need - Recall that in a typical arrangement, the more you borrow the greater the mortgage broker's commission. Don't let the mortgage broker pressure you into borrowing more than you actually need.
It's not the promise that counts – Get everything in writing. If your mortgage broker promises you a great deal or an exceptionally low interest rate to entice you to sign on, but can't deliver on those promises, consider switching to a different broker before making any further commitment.
Monitor interest rates - If interest rates decline between the time you lock in your rate and your closing, ask for a lower rate. To best protect yourself, you should have your broker commit in advance that, if interest rates get lower in between times, you will pay the lock rate which would be offered to a new customer on the date of the closing.
Get written confirmation of a lock - If your mortgage broker charges you a fee to lock in a particular interest rate, have the broker provide you with a copy of a written commitment from the lender. Some mortgage brokers have been known to pocket the lock fees.
Read the loan agreement - Make sure that the loan you receive is the same as what the broker promised. Even if the loan paperwork seems convoluted and complicated you could still make a list of questions to ask the broker about to ensure you understand all aspects of your loan and commitments. It is useful to have your loan agreement perused by a lawyer to ensure you know exactly what you are signing up for.
Lastly…..
Taking the step of approaching a mortgage broker is sensible and beneficial to most people. It can at the least confirm that you have the best loan offer already available to you or at best it could mean you get a chance to obtain a better loan that better meets your needs and circumstances more completely, also leaving more money in your pocket at the end of the day.
* Original article revised and edited by Tanya Frazer