Updated: May 16, 2020
You’ve zeroed in on your search and found your dream home. Now you’re on the hunt for the mortgage you need to put those keys in your hand.
Not many know that one option you can take is to work with a mortgage broker who can guide you through the lending process from beginning to end.
Maybe you have heard the term “mortgage broker” from your real estate agent, or from friends who’ve already bought a home. But what exactly is a mortgage broker and what are the reasons to use one?
What Is a Mortgage Broker?
A mortgage broker is an intermediary who works between mortgage borrowers and mortgage lenders, but does not use their own funds to originate mortgages.
A mortgage broker connects a borrower with lenders and can will help to identify mortgages which are the best fit in terms of the borrower’s financial situation and interest-rate needs.
The broker also facilitates the appropriate paperwork and documentation, assisting the borrower to complete it and passing it along to a mortgage lender for underwriting and approval. A mortgage broker should not be confused with a mortgage banker, which closes and funds a mortgage with their own funds.
How a Mortgage Broker Works
A mortgage broker serves as a mediator between borrowers and lenders, as well as an adviser to the borrower.
Whether a potential borrower is planning to buy a new home or to refinance their existing one, a broker gathers loan options from various lenders for the borrower to analyze, while qualifying the borrower for a mortgage.
The broker also gathers income, asset, and employment documentation; a credit report; and other information for evaluating the borrower’s ability to secure financing.
The broker determines an appropriate loan amount, loan-to-value quota, and the borrower’s ideal mortgage type, then submits the loan application to a moneylender for approval.
Lastly, the broker makes communications with the borrower and the lender throughout the whole transaction. In short, they take away a great deal of the headaches involved in securing a mortgage as a borrower.
How To Get Started Working With a Mortgage Broker
- Find your dream property through a real estate agent.
- Instead of going to a bank for a home loan, you can have a mortgage broker work on your behalf.
- The mortgage broker will both shop around with multiple lenders to find the best rate for you, and manage your loan application from start to finish.
7 Reasons Why to Use a Mortgage Broker
It is certainly not essential to use a mortgage broker: you can deal directly with a bank or financial institution in order to secure your home loan. However, there are a number of reasons why using a mortgage broker is beneficial.
1. The mortgage broker has a wide network.
Mortgage brokers have a wide network of lenders that they work with, so will be able to get you the best possible terms and interest rates on your mortgage. The more lenders you are able to consider for your home loan, the more you can potentially save.
2. A mortgage broker knows how much you can borrow.
A mortgage broker can work out how much your loan must be. This amount can vary significantly from one bank to another and it is important that you know which one is suitable for you.
3. Mortgage brokers are experts in their fields.
They offer you often much-needed guidance on mortgage products, current market circumstances and interest rates. Mortgage brokers only sell mortgages and related products. Because they are counselling people on mortgage choices every day, they are aware of the potential pitfalls and hazards, as well as the best options for your individual situation.
4. A mortgage broker provides constant consultation and they are always on your side.
Your mortgage broker will review your circumstances at least once every 12 months and evaluate if your borrowing structure is still meeting your present needs. They may be able to suggest refinancing to a more favorable loan. They also negotiate with the banks directly when your rate comes under review.
5. Mortgage brokers understand credit policies.
Each bank and lending agent differ in terms of their terms and policies, and a good mortgage broker can make recommendations on which bank will be suitable for your individual circumstances. A great mortgage broker can also decode the jargon to help you understand your options. If you want to be able to make early repayments, your mortgage broker will help you find the terms that enable you to do that.
6. Mortgage brokers are independent.
This means your mortgage broker will be neutral and unbiased. Your mortgage broker doesn’t work for one particular lender which means you will get an impartial opinion on which solution is best for you. Your mortgage broker works for you and as most work on commission securing your mortgage is their interests also.
7. Mortgage brokers save you stress and time.
Looking around for the best mortgage option can be time consuming and exhausting. Your mortgage broker will complete one application with you, which can be used for all mortgage providers. They will take care of the leg work of going back and forth with various banks to get you the best rate possible. So, while you are out house hunting, or working out the logistics of moving, you can leave this effort and hassle to your broker.
This article is contributed by Remya Menon.