Are you wondering whether or not you should use a mortgage broker for your home purchase? Finding the right mortgage is an important part of the home buying process. It can also be an expensive mistake if you get it wrong.
Lots of buyers ask if there are any advantages for using a mortgage broker rather than a local bank or lender they find online. The primary advantage of using a mortgage broker is they can help you find a better deal which is going to save you money in the long run.
Mortgage brokers act as a link between lenders and homebuyers to find the loan most suitable for you. They will be able to check the mortgages available from various lenders, saving you time, and reducing the hassle involved. They can act as the liaison between you and the lender to make sure the underwriting of the loan goes to plan and isn't delayed.
The industry is regulated like other financial businesses and can offer you an easier way to secure a mortgage on your new home. Before picking a lender or mortgage broker, however, first-time buyers should work on getting their financial house in order. Doing so will ensure you get the best terms and conditions from whichever lender you finally select.
Part of the process will be working on your credit score to ensure you're in a position to score the best rates. Buyers can start the process by getting their credit report to check for errors. Mistakes in your report can have a dramatic impact on your score.
If you already know you need help with improving your score, consider looking into Credit Karma. The company offers some excellent tools for monitoring and improving your credit standing. Lots of folks have no idea how certain financial decisions can have a negative impact on their score. Credit Karma helps solve that issue by providing what will happen to your credit based on a number of financial decisions.
Let's take a look at the services offered when you use a mortgage broker so you'll be in a great position to buy before putting down your earnest money deposit.
Where Do Mortgage Brokers Earnings Come From?
One of the questions lots of buyers ask when considering using a mortgage is how they get paid. Brokers are normally paid a percentage of the loan amount from the lender. This is generally in the range of 0.5 to 3 percent of the mortgage amount. They will have lenders that they have worked with before and should have a good understanding of which could offer you better deals.
As a borrower, it is possible to pay the broker for their services directly. This is known as a borrower-paid compensation agreement. This will also be a percentage of the loan amount but could work out better for you in some circumstances.
Broker's fees will vary depending on how competitive the market is. Fees are often lower in large cities and higher-priced homes can also reduce the percentage amount.
There aren't rules for how low a percentage a broker can take, but there are rules for the highest amount. Brokers can't earn more than 3 percent of the loan amount in fees.
What's the Difference Between Loan Officers and Mortgage Brokers?
A loan officer works for a lender as a salaried employee. Mortgage brokers work for a brokerage firm or independently and are paid through commissions. A significant advantage of a mortgage broker is the flexibility they offer with various loan products. They are not boxed in based on one lender's mortgage products.
Choosing the Right Mortgage Broker
If your friends or family have a recommendation of a broker they've used, this can be an excellent way to find a great mortgage broker. Do some research online, to find out what other people are saying about the service provided by the broker and if they had a good experience.
Your real estate agent should be able to give you the details of some mortgage brokers that they have used with good success in the past. Sometimes agencies offer mortgage broker services as part of their business as well. Just because you are signed up to the real estate agency, though don't think that you can't turn elsewhere. They might be offering a good deal, however, since you are using their other services, so it is worth investigating.
You will be in a better position if you shop around to see what a few brokers offer. Reviewing the services of at least three or more lenders should allow you to find one which stands out. Compare the services they offer and check how much experience they have.
When you think you have a broker that is right, make sure they are licensed with no complaints. Check their license online to make sure there aren't any problems with the business. Also, search for customer's testimonials on independent sites and look at their BBB page for complaints. Doing a Google search of their name should give you any negative reviews that would at least be worth looking into.
Precautions to Take When Using a Broker
A broker can find you a mortgage which seems to have a great interest rate, but it is important to make sure you understand all of the charges involved. The lender will have fees that are due to be paid and this can make a difference to how good the mortgage really is.
The broker will provide a loan estimate from each lender that meets your criteria. You can compare what each has to offer, the interest rate, and their fees, to see which provides the best value. Only then will you be able to assess which lender is offering you the best loan.
A significant mistake many consumers make is looking at just the rate and not all of the fees associated with the loan. The fees and charges can have a substantial impact on the overall cost of the loan. For example, you may want to get an FHA loan and one lender might have a lower rate. The lower rate, however, could be for not if the fees are out of sight. It becomes essential to compare loans apples for apples.
Final Thoughts on Using a Mortgage Broker
Buying a house is normally the biggest expense any of us will make and choosing the wrong mortgage is going to cost you more in the long run. Over my thirty-three years of working in the real estate industry, more often than not I've had my clients work with a mortgage broker.
The chances of getting better mortgage terms from a broker are far more likely that if you walk into the closest branch of Bank of America. Over the length of your mortgage, more favorable terms can have a significant impact on your bottom line. Do yourself a favor and spend the necessary time shopping for the best mortgage rates. A mortgage broker can be a key ally in accomplishing your goals.
Hopefully, you now understand why getting a loan with a mortgage broker makes sense.