Mortgage Broker – Things You Must Know Before Working with One
If you’re buying a new home, an investment property, or a vacation house, chances are you’ve heard about the term “mortgage broker”. Not only will this person help you get a mortgage loan, but they will also help you figure out the right type of mortgage for your needs.
Here’s everything you need to know about mortgage brokers so that you can understand how they work and see if they can help you get the house of your dreams.
Mortgage Broker Job – What Does a Mortgage Broker Do?
Mortgage brokers connect mortgage borrowers and lenders without using their own funds to originate mortgages, Corporate Finance Institute explains.
You can say they are the middlemen who do the whole mortgage process, working directly with the mortgage borrower to help them find a deal that matches their criteria while communicating with the mortgage lender during the entire process.
They look for the best fit for borrowers in terms of their interest-rate needs and financial situation, and gather all relevant documentation and paperwork, passing it along to the lender for underwriting and approval.
Their lender connections allow them to shop around on the borrower’s behalf, understandably, at a fee.
So, if you’re wondering whether they can help you get a mortgage, the answer is yes!
What Is a Mortgage Lender?
It is a bank, corporate entity, or credit union that offers and underwrites home loans, Investopedia explains. They require repayment plus interest, and interest rates can vary drastically from borrower to borrower.
Mortgage Broker vs Lender
As you can see, the lender is a financial institution, such as a bank, that decides if a person is qualified for the loan and eventually hands over the check. The broker, on the other hand, helps the person find the best mortgage lender for their financial situation.
What Is a Mortgage Advisor?
Mortgage advisors are qualified professionals whose job is to find the best mortgage deal for your needs. Therefore, there’s no real difference between these professionals and mortgage brokers, Unbiased explains.
What Is an Independent Mortgage Broker?
A independent mortgage broker is a broker that can source mortgages from the whole country rather than being restricted to certain providers. They are able to ensure you get the best deal possible.
What Is an Online Mortgage Broker?
Working with a ‘robo advisor’ or an online mortgage broker means carrying out most of the mortgage application process and comparison online.
This means no face-to-face meetings with traditional brokers, which can save you valuable time. But, Which.co.uk explains , at a point in the process, a human broker is necessary to ensure the application is accurate and legally binding.
When Should You Use a Mortgage Broker?
A mortgage broker will save you time when applying for preapproval with various mortgage lenders. They work with many mortgage lenders so they can help you find the best mortgage interest rates and terms.
This allows you to focus on other matters like house hunting. They are especially helpful to first-time homebuyers, those who want to remove some of the headaches and legwork from the whole process, as well as those who have no W2 income, are self-employed, or have bad credit, as stated by the Balance.
What Are The 2 Major Types of Mortgages?
There are different types of mortgages on the market, but the two major ones are:
1.Fixed rate mortgages – where the client is charged with an interest that stays the same for a set term, usually 2 to 5 years.
2.Variable rate mortgages – where the interest the client is charged can change.
Can You Work with Two Mortgage Brokers?
Even though it’s possible, since it’s an open market, working with two brokers at the same time can unnecessarily waste their time. A good broker will find the best possible rate for you if you allow them to!
How to Choose the Best Mortgage Broker Near Me?
Here are a few tips from Really Moving to compare mortgage brokers and find the best one for you:
- Check the register to see if they are properly qualified and registered to ensure they are trustworthy
- Look for those that are described as “whole-of-market” which ensures they have access to every possible mortgage
- Compare fees to save money while also getting a high-quality service
- Compare services mortgage brokers provide as some work by phone, others online, and third face to face, and see what works best for you
- Read more than one customer review
- Look for a broker that can work around your schedule
Remember, if you don’t like the way your broker works, you can always change it and find a better one.
What Makes a Successful Mortgage Broker?
American Financing says that the minimum education requirement to become a mortgage broker is a high school education. However, it may take 5 to 10 years to become a successful broker. It’s a job that requires working nights and weekends, so it can be stressful.
Here are the key traits of successful brokers
- A people person – one who is willing to listen to mortgage borrowers and builds strong relationships with mortgage lenders
- Someone with a clear vision – this helps them figure out their next steps, priorities, and targets and how to achieve them
- Someone who offers multiple loan options and allows the borrower to make the final decision
- A broker who responds to phone calls and emails in a timely manner
- Someone who explains all the details of loan products, services, and fees
- Someone who’s open to questions
- A broker who doesn’t rush their clients
- Someone who never puts their client in an uncomfortable situation when it comes to the loan
How Do I Know If a Mortgage Broker Is Legitimate?
According to Consumer Financial Protection Bureau, The Nationwide Mortgage Licensing System, or NMLS, has a database of licensed mortgage brokers.
You can also check with your state regulator to see if there has been an order of disciplinary action against your potential broker.
Mortgage Broker License
The mortgage licensing laws of certain states require a mortgage license so that a person can be a mortgage broker.
To get an NMLS license, a person usually has to complete pre-licensing training that lasts around 20 hours through an approved organization. After that, they must pass a SAFE Mortgage Loan Originator test that comes in two parts, which is explained here on American Financing reports.
Mortgage Broker Salary
The average salary of mortgage brokers is $92,262 per year in the USA, Indeed reports. However, this depends on many factors, including the geographic location and experience level.
How Much Does a Mortgage Broker Cost and How Do They Get Paid?
Licensed mortgage brokers work independently and not for banks. They charge the mortgage lender a commission, which is from 0.50% to 2.75% of the loan amount, or the borrower a fee, which is usually 1% to 2% of the loan amount, Forbes explains. This percent may vary depending on the number and size of loans.
For example, a $400,000 loan balance equates to around $4,000 fee from the mortgage borrower, or around $8,000 from the mortgage lender.
Can You Negotiate Your Mortgage Rate?
Yes, you can and you should if you don’t want to leave money on the table. Fox Business recommends:
- Comparing several mortgage lenders and loan rates
- Asking a lender or bank to match other mortgage offers
- Using mortgage or discount points – these are fees you can pay directly to the mortgage lender so that you can get a lower interest rate
- Building up your credit card history and working on your credit score before applying
- Making a bigger down payment
Can You Negotiate Mortgage Broker Fees?
You can only ask them what their fee covers so that you know what you get for your money before agreeing to work with them. You should also know that some brokers don’t charge mortgage applicants a fee because they charge lenders instead of clients.
Is a Mortgage Broker Worth It?
In general, working with a mortgage broker is a good idea because they can see what mortgage repayments you as a mortgage borrower can afford, based on your day-to-day spending, debt repayments, and income. As a result, you’ll get the best mortgage for your financial situation.
How Mortgage Brokers Rip You Off
Even though working with a mortgage broker is usually worth it, sometimes they can rip you off.
Basically, they are either paid by the lender or the buyer. When they are paid by the lender, they get a higher fee, but they may negotiate a more expensive mortgage rate in return.
In other words, the buyer may think they are getting a free service from the broker, when in reality they’ll pay more interest over the life of the home loan.
Some brokers are not honest and may get you a deal that’s more advantageous for them than for you. They can also be biased based on their experience with mortgage lenders.
What Is the Best Loan Type for a Mortgage?
FHA loans are the most popular loan type thanks to the flexible income guidelines, less stringent credit requirements, and small down payment requirements.
They can offer low interest rates while still being lenient with credit and income guidelines. That’s why this type of loan is considered the best, especially for first-time homebuyers.
Are There Home Loans That Don't Require a Down Payment?
Yes, there are. Right now, there are two home loans that allow people to buy homes without a down payment – VA loans for military service members, surviving spouses, or veterans, and USDA loans for people buying a house in a designated area.
Can You Have Two Mortgages at Once?
Yes, you can have as many mortgages as you want. However, you may have difficulty finding a lender that will allow you a new mortgage loan after the first few.
Mortgage Brokers vs Banks
Mortgage brokers and banks or direct lenders are the two major sources of money when shopping for a mortgage loan. So, how to choose which of these options is better for you?
Is It Better to Get Mortgage from a Bank or Broker?
The truth is, there are pros and cons to both, so the answer depends on several individual factors including whether or not you need flexibility in a mortgage lender, the strength of your current banking relationship, who offers the loan options you need, and referrals and recommendations.
So, if you’re a first-time homebuyer or simply need a helping hand, a broker is probably the better option. On the other hand, a bank would be the best route if this is not the first time you obtain a home loan, in which case your local bank can offer the best experience and even provide you with a discount based on your pre-established relationship.
Why Use a Mortgage Broker instead of a Bank?
In general, a mortgage broker can shop your rate with multiple mortgage lenders to find the best deal for you, while banks can only offer loan programs and rates from their company, according to The Truth About Mortgage.
Are Mortgage Brokers More Expensive?
For most mortgage loans, working with a broker is free. Usually, mortgage brokers negotiate a better deal for you which means paying less. But, your own bank may offer a discount if you have a saving/checking account.
It’s best to compare a mortgage broker’s rates and services to those of your bank to decide what works best for you.
Can You Get a Mortgage without Showing Bank Statements?
No, you can’t. You must provide all bank statements to ensure you can afford your closing costs, down payment, and make your monthly mortgage payments.
How Do I Get a Mortgage from the Bank?
First, you need to shop around to choose the right bank for you, because mortgage rates can vary around half a percentage point among direct lenders. Then comes the 10-step guide to the mortgage loan process explained by Bank of America:
- Submit your application
- Schedule a home inspection
- Provide any additional documentation your lender needs
- Purchase homeowner’s insurance
- Let the process play out which involves a home appraisal and title search
- Avoid taking on new debt
- Lock in your interest rate with your lender
- Review your documents
- Arrange to pay your closing costs and down payment
- Close on your home
What to Do Before Applying for a Mortgage?
Preparing ahead of time for your loan application can help you get the loan you need for your dream house and make the entire process easier for you.
This involves knowing your budget, improving your debt-to-income ratio, saving up for a down payment, boosting your credit score, knowing your loan options, and finding the right lender or broker.
Working with a broker can help you go through this process more easily. In fact, they will do the job for you, provided that you’ve done your research and found a good broker.
What Questions Should I Ask a Mortgage Broker?
You should always ask the following questions of your potential mortgage broker before committing to a home loan:
- What type of loan is right for me?
- What is the annual percentage rate and interest rate?
- How much of a down payment does my loan type require?
- What are the origination fees and discount points?
- What are all the costs?
- Can I get a loan rate lock?
- Is there a prepayment penalty?
- Is the mortgage lender equipped to approve loans in-house?
- How much time do I need to fund?
- What is the anticipated loan processing time?
- Do you guarantee on-time closings?
Things You Should Not Say to Your Mortgage Lender
According to Forbes, getting a mortgage is now harder due to the high COVID-19-related unemployment and the unpredictable economy.
Don’t increase the risk of your loan application being rejected by:
- Lying or hiding certain info
- Asking how much you can borrow
- Saying that you’ve forgotten to pay some bills
- Telling them you have applied or opened up several new credit cards
- Saying you’re thinking about leaving your salaried job
- Asking them what happens during the foreclosure process
- Asking what a credit score is
Which Bank Has the Best Mortgage Rates?
USAA, Guaranteed Rate, and Bank of America have the best 30-year mortgage rates, even though this can vary from person to person.
What Are the Best Mortgage Rates Today?
Mortgage rates under 2.5% for VA loans are now real, but, determining a rate is complicated and individual.
What Are the Best Mortgage Companies for Bad Credit?
Some of the best mortgage companies for bad credit include New American Funding, Navy Federal Credit Union Mortgage, PNC Bank Mortgage, and Wells Fargo Mortgage.
Mortgage Broker Holly Springs NC – Top 10
Yelp shares some of the best mortgage brokers in Holly Springs, NC:
- Sunset Lake Mortgage
- Blue Sky Mortgage Services of NC
- Premier Mortgage Funding
- Primary Capital Mortgage
- Country Home Mortgage
- Andy Holloman – GoPrime Mortgage
- PNC Bank
- James Monastero – HomeVantage Mortgage
- North Carolina Mortgage Group
- Stephen Livesay