When most people buy a home, they use a mortgage broker. A Mortgage broker is a professional who is in the business of wading through various options so that shoppers do not have to. A mortgage broker acts as a personal shopper when dealing with financial options using your financial situation as a guide. Many states require a license for mortgage brokerages, and individual brokers are often certified by the National Association of Mortgage Brokers (NAMB).
How Mortgage Brokers Help Home Buyers
A good broker helps you find your best mortgage option by:
- Discussing your financial situation and goals you may have
- Finding available financing options and explaining them adequately
- Helping get preapproval for a mortgage
- Helping to complete the loan application and collecting the mountains of paperwork the loan officer needs
- Once approved, acts as a liaison between the borrower and the lender up all the way through the closing day.
How Mortgage Brokers Get Paid
Mortgage brokers actually make a majority of their income by marking up the cost of the loan. This gets passed on in the form of points, a higher interest rate, and processing fees. A savvy borrower can negotiate a broker’s fee when it seems excessively high while a good mortgage broker should be able to find an affordable mortgage so you pay nothing above cost.
Finding a Good Mortgage Broker
Get recommendations from your friends, co-workers, real estate agent, and even other homeowners in the area. Look for someone who is patient and experienced working with buyers like you. Check out online reviews, such as Yelp or Zillow and the mortgage broker’s website.
Interview two or three potential mortgage brokers. They work for you after all. Ask about experience and certifications. Find out how many residential mortgages they have brokered in the past, explain any issues specific to your situation. If you are looking to purchase a house with a VA home loan, for example. Get the information of three references, and follow up. See whether these folks were actually satisfied with their loan and broker.
The Difference Between a Mortgage Broker and a Mortgage Lender
Some homebuyers skip the broker and go directly to a financial institution. If you go this route, you will probably be dealing primarily with a mortgage banker or loan officer within the company. This person will perform the same duties as a mortgage broker. The exception is that instead of searching all loan options available, the loan officer will only search within their bank’s portfolio of loan products. This immediately limits your options on the loan and you will be assigned a loan officer as opposed to choosing.
The amount of contact you have with the assigned loan officer is dependent upon the lender. From the huge corporate banks to your local credit union there is a range of lenders. Some start and end online. With online lenders, you will rely heavily on electronic document transmission with no one there to remind you of what and when to do things.
So the truth is that you can purchase a home without a mortgage broker, but it is better with one. If you are looking to purchase a home, check with friends and family. Interviewing a broker does not mean that you have to choose one. Be aware of your options and be a smart consumer. A broker will help you do that.