If you are looking to buy a new home, you probably have begun researching mortgages and how to buy a home. A mortgage is a legal contract and a lien in which a bank or other creditor loans money to a person, the debtor, and accepts title of the debtor’s real property.
Once the obligations of the loan are fulfilled, the title transfers to the debtor. Most individual homebuyers obtain a mortgage in order to purchase their primary home. Even after a purchase, a homeowner may decide to mortgage their property by obtaining a new line of credit or a new loan on the title.
- What Does a Mortgage Broker Do?
- Are the Services of a Mortgage Broker Expensive?
- What is the Difference Between a Mortgage Broker and a Mortgage Lender?
- What are the Advantages of Using a Mortgage Broker?
- Are there any Disadvantages in Using a Mortgage Broker?
- How Do I Determine if My Mortgage Broker is a Reputable One?
- Do I Need an Attorney if I Have a Mortgage Broker?
Mortgage brokers are licensed and regulated financial service providers. They work with a variety of lenders or banks so they can assist an individual buyer with multiple loan options when purchasing real estate.
Instead of a buyer going to multiple banks or creditors requesting a loan to purchase, a buyer can hire a mortgage broker to find the best option for their particular circumstances. Depending on your income and credit, hiring a broker can help streamline the search process and sometimes offer you a better deal than what you might find only on your own.
Mortgage brokers can:
- Research a variety of loan options;
- Compare interest rates;
- Originate a loan;
- Work with real estate agents, banks, and the buyer to coordinate the buying process; and/or
- Gather and organize financial documents needed for completing the buying process.
Mortgage brokers are typically paid 1-2 percent of the loan amount. They may be paid by the lender or paid by the buyer. If you are using a mortgage broker, it is important to understand who is paying for their services so you can factor that expense in your home buying budget.
Mortgage lenders are the bank or creditor providing the loan to purchase the property. A mortgage broker is an agent that can assist a buyer by offering a range of loan options at varying banks or credit institutions including information about different rates or terms. Think of a broker as a person who finds and connects the lender with the buyer.
While it is clear that there are many tasks mortgage brokers can undertake, there are some clear advantages that should be kept in mind:
- Access to a variety of lenders including rates, terms and whether you qualify for their products without any upfront charges.
- Brokers may be able to offer you a particular loan or rate when a traditional bank was unable to do so.
- They can manage document gathering and submission necessary to ensure everything needed is completed timely.
- An experienced broker can help the closing process occur more efficiently.
However, where there are advantages, there are also disadvantages. But not every disadvantage is enough to discourage someone from potentially hiring a mortgage broker. Here some some disadvantages to remember, going forward:
- Some buyers may get a better rate at a traditional bank than what a broker can provide.
- Brokers are an outside third party, so they may have less control over your account than a mortgage banker at a particular bank would when handling your loan.
- An inexperienced or bad broker may add problems by failing to do something or doing it incorrectly.
- You may end up paying a broker fee for a loan you could have found on your own.
Do your research on the individual broker. Even after you hire one, you should still do your own research on loan rates and terms in addition to reviewing the products the broker has to offer. Make sure to go through the following before you make your final choice:
- Make sure they are licensed on the Nationwide Mortgage Licensing System & Registry.
- Check to see if they have any disciplinary actions filed against them by contacting your state regulator.
- Look for third party reviews such as online reviews, real estate agents, and past buyers that worked with the broker.
- Interview the brokers you have researched and look for a personality that matches your needs considering their response time, primary contact methods, and overall demeanor that you want.
- Check their rates and make sure they are an affordable option for your needs.
- Confirm their experience such as their ability to close on time, their relationship with a variety of lenders and their understanding of the market.
- Make sure they are cooperative. They will need to work with real estate agents and banks on your behalf.
A real estate attorney can advise you of all the requirements regarding your mortgage contract and the home purchase contract. A broker is not an attorney and cannot fully advise you of the consequences and obligations of a legal contract.
Thus, consulting a real estate attorney after you have obtained the mortgage terms you want to enter and the property you want to purchase can answer all your questions and concerns regarding this life changing purchase.