A mortgage broker is a person that comparison shops home loans for you so that you can save time and find the best deal possible.
Mortgage brokers may work independently or on behalf of a larger brokerage. And while your real estate agent will likely have a broker recommendation for you, working with an independent mortgage broker may be advantageous if you have bad credit or are searching for loans that are not offered by traditional lenders. And saving time and getting a great deal aren’t the only benefits to using a mortgage broker.
Mortgage brokers are paid a commission, known as an origination fee, which is only paid once you agree to the terms of a loan. This means that they only get paid when they find a loan that you agree to, so they’re going to go to bat and get you a great offer.
It is important to know that mortgage brokers do receive a higher commission if you agree to a bigger loan with higher terms, so make sure you feel them out first. But rest assured that mortgage brokers also know you’ll likely be researching rates as well, so your researching incentivizes your mortgage broker to find you the best deal possible so that you are more likely to sign and your mortgage broker gets paid.
Now let’s look at what a mortgage broker does and how a mortgage broker benefits you as a buyer.
What Does a Mortgage Broker Do?
A mortgage broker is responsible for finding a loan that meets your needs so that you can close on your home.
Mortgage brokers start by gathering financial data about the home shopper (you in this case) to determine whether the home buyer is creditworthy and what an appropriate loan-to-value ratio (LTV) would be. A LTV ratio is used to help determine what you can and cannot afford.
From here, the mortgage broker submits your data to multiple lenders in order to see whether or not you are approved for a loan and on what terms.
After the mortgage broker receives feedback from a group of lenders, they will submit a loan package with the best terms to you and your agent to see whether or not you will agree with them. If you do, then you can close on your home, and your mortgage broker can get paid. If not, they will have to shop for another loan.
In addition to this, mortgage brokers are responsible for maintaining communication between lenders and borrowers to ensure that all necessary information is acquired for a loan application.
It’s important to note that mortgage brokers do not exercise control over a deal, so they cannot dictate the loan terms or closing. The mortgage broker’s core responsibility is to find the best loan for your particular financial circumstances and hope you agree to the terms. Although the mortgage broker does not have control over the deal, there are still more benefits to using mortgage brokers.
The Benefits of a Mortgage Broker
The benefits of using a mortgage broker include:
- Saving you money by finding a loan with the best terms
- Saving you and your agent time from having to apply for a loan yourselves
- Helping you find a loan that will approve you based on your needs and financial history
There is also a drawback to using a mortgage broker. The commission. The good news is that the commission is normally 0.5% to 1% of the total mortgage, and if you think about the time and cost savings by having a mortgage broker do the heavy lifting, it is well worth using a mortgage broker.
Now you know what a mortgage broker is, what their responsibilities are and the benefits of using a mortgage broker.