What is A Mortgage Broker and Why Do You Need One?
A mortgage broker is a person or a company that arranges a mortgage between lenders and borrowers. They apply for the loan with different lenders, finds the lowest rates, negotiate the terms and get them approved for you. The mortgage brokers at crownmoneymanagement.com.au work on your behalf with the banks and lenders to make your life easier.
What do they do?
These brokers are licenced professionals who do the legwork of gathering the documents such as your credit history, verification of employment and income. Then they do all the paperwork of applying for the loans on your behalf. After they have gathered the information on your income, employment, assets and credit report documents they study them.
After they have assessed the borrower’s ability to repay they determine the appropriate loan amount, the loan to value ratio (LTV) and the ideal loan type. The application is then sent for approval. The mortgage broker is a live link between the lender and the borrower during the entire process.
How do the Mortgage Brokers earn?
The brokers collect an “origination fee” from the lender as a compensation for bringing in the business. This commission is usually 1% of the loan amount. These are known as no cost loans as the borrower does not have to shell out this commission.
No cost loans may reduce the borrowers out of pocket expenses, but they may have to pay higher interest rates; making it a costlier deal in the long run. In some cases, the commission is paid by the borrower at the closing of the deal. A mortgage broker is different from a mortgage banker as they close and fund the mortgage with their own funds.
Why do you need a mortgage broker?
It is always beneficial to have a professional wading through all the paperwork for 1% of your loan amount. They act as a personal concierge who ascertains that your documents and ensuing paperwork are in order. The other benefit is that they keep you informed about the process and the purpose of the step or stage in the processing of your loan application.
They seek out the lowest mortgage rates and best loan programs by tapping into their vast database of lenders. Thus, saving a lot of time and other costs over the life of the loan. Unlike a mortgage banker who sells the banks products to the borrower, the mortgage broker works with many lenders widening the borrower’s choice. This way they can study the loan conditions and rates.
At a given time, the broker works with a small number of borrowers until the transaction is completed. They don’t get paid until the loan closes. This requires the broker to work closely with the borrowers. Due to this factor, your application is queued and may be put on hold until your turn arrives.
In case if a loan originated through a mortgage broker is declined the broker can apply to another lender. Besides some banks and lenders work exclusively with certain mortgage brokers. This means you will have access to otherwise inaccessible loans.
Due to these vast experience and time in the field, these professionals have a relationship with national, regional and local lenders. They can tap these connections to make all the lending and approval magic happen for you.
The other benefit is that the brokers get the lenders to waive the fees for application, appraisal, origination, etc.
To choose the right mortgage broker interview at least three agencies and people. Study their experience, their offering, and process. Examine how they can simplify the process at a reasonable cost. They should be licensed and regulated by authorities such as the Better Business Bureau. The big banks and lending corporations do not extend all the above-mentioned benefits.
This article was contributed by Alex from crownmoneymanagement.com.au/mortgage-brokers/