Should You Use a Mortgage Broker to Find a Home Loan?
Home buyers and refinancing homeowners have multiple ways of borrowing money to finance their home. They can go to a big bank, a community bank, a credit union, an online lender or a direct lender that only offersmortgage loans.
Another option is to consult a mortgage broker.
While mortgage brokers used to dominate the home loan business, new regulations and changes in the way these financial professionals get paid have shrunk the number of brokers in business.
However, according to the lending industry publication Inside Mortgage Finance, one out of every 10 new home loans originated in 2013 came through a mortgage broker.
Simply put, a mortgage broker acts as a middleman between borrowers and the lenders who actually fund and service your loan. While you can easily approach a lender on your own, some borrowers prefer to use a mortgage broker—because a broker can search for loans from multiple lenders.
Shopping for a Mortgage
When you purchase new insurance or look for a new doctor, you typically compare multiple service providers. You should follow the same pattern when you are financing your home purchase.
Even if you’re looking for a “plain vanilla” 30-year, fixed-rate loan, you’ll find that different lenders will offer slight variations in the interest rate or the fees you pay to close the loan. Comparing loan terms from at least three lenders is ideal.
If you have a challenge in qualifying for a loan—such as a low credit score, a spotty job history, a high debt-to-income ratio, income from self-employment or a side business—you may want to discuss your options with multiple lenders, because you’ll find more variation in the cost of the loan.
Lenders have different programs and different thresholds for what they consider risk, so while one may turn you down for a loan, another may be willing to approve you.
However, if you simply are not qualified for a loan right now, you’ll have to clear up the problem before you can borrow money to buy a home.
How Mortgage Brokers Help
A mortgage broker will gather all your financial information and documents, and they will complete your loan application with you.
Whether you are a first-time buyer or a repeat buyer, a mortgage broker can help by explaining all your loan options and programs that could be financially beneficial. Most lenders will do this as well, but they can only talk about the programs they offer rather than the range of loan products a broker can access.
Once you’ve decided with the broker what you loan you want, the broker will communicate with the lender and follow through with the application process. If there are any issues that come up during the loan underwriting phase, the broker can work with the lender to overcome obstacles and coordinate details. The broker will also coordinate your closing.
The mortgage loan process today can take a significant amount of time and effort for borrowers. A broker can help smooth the experience.
Finding a Mortgage Broker
If you decide you’re interested in working with a mortgage broker, you should interview several brokers—and check their credentials and references.
At the same time, you should consult one or more lenders to see if you find someone who will provide you with the financial education and support you need.
It’s important you find someone you can trust, whether that person is a mortgage broker, banker or direct lender.
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