A mortgage broker is an intermediary between a financial institution that offers a loan that is secured with real estate and individuals interested in buying real estate that need to borrow money in the form of a loan. The mortgage broker works with both parties to get the individual approved of the loan. Their job is to collect and verify all the necessary paperwork that the lender needs from the individual to complete the loan process. The mortgage broker works with many different lenders and can offer a variety of loan options to the borrower they work with. They complete real estate transactions as a third-party intermediary between a borrower and the lender. When it comes to working, the broker collects information from the individual and then goes to multiple lenders to find the best potential loan for their client. Finally, the mortgage broker will serve as the loan officer, when they complete the necessary information invoke with both parties to get the deal closed.
If you are thinking of working with a mortgage broker, you should keep in mind that there are both advantages and disadvantages to consider before committing to one.
Advantages
- Broker may save your leg work
The task of the mortgage broker is to have regular contact with a variety of lenders, many of whom you may not even know about. It is recommended to do some research of your own before finalizing a broker. You can do some search online.
- Broker has the better access
Many lenders prefer to work exclusively with mortgage brokers and they rely on them to be the gatekeepers to bring them suitable clients. Without the mortgage broker, you may not be able to call some lenders directly. Brokers can also get special rates from lenders due to the volume of business generated.
- a broker may be able to manage your fees
Several different types of fees are involved in taking a new mortgage or working with the new lender, like application fees, appraisal fees, origination fees, etc. Due to pre-established Contacts and relationships, a mortgage broker may be able to get lenders to waive some of it or all of these fees, saving you hundreds to thousands of dollars.
Disadvantages
- A broker may not source the best deal for you
Many people tend to assume that a broker can deliver a better deal than they could get on their own; however, this is not always the case. Some lenders may offer homebuyers the very same terms that day offers the mortgage brokers. Thus, it is always recommended to shop around on your own to see if your broker is offering you a great deal. You should also try using tools like a mortgage calculator to check if your broker is offering you a good deal or not.
- You may owe broker a fee
The mortgage brokers are paid either by the lender or by you. You should keep in mind that if the fees are paid by the lender, you might be offered more expensive loan because the Commission involved to broker is more lucrative. However, if you are the one to pay the fees, it is better to figure out the mortgage cost before deciding how good a deal you are getting and also make sure to settle all the fees issues upfront before you sign anything.
- The interests of the broker may not align with your own
The ultimate goal in shopping for a mortgage should be to find an affordable interest rate and lower fees. However, a mortgage broker often gets the fees from the lender for bringing in the business. This can turn brokers’ goal to get you into a mortgage that maximizes their compensation.
