Mortgage Brokers Have More Options
Three is often the perfect number when selecting a provider of any service.
Whether it’s a physician, insurance agent, or financial adviser, it’s wise to refrain from signing up with the first one you talk to.
The same principle is true when selecting a mortgage broker.
This provider’s job is to help you secure the most affordable, favorable home loan. Most brokers offer the same types of financing that banks do, including FHA loans, conventional mortgages, or VA loans which are backed by the Department of Veterans Affairs.
They may also have access to more obscure loan types like manufactured home loans and land loans.
The broker won’t actually issue your loan, but acts as a liaison with a lender who will.
Selecting the right individual for the job can help you secure a lower rate and give you access to more mortgage options.
What Is A Mortgage Broker?
A mortgage broker is similar to a mortgage banker in that he or she offers mortgage loans to consumers.
But a mortgage broker does not sell its own company’s mortgage products. Instead, it “connects” its customers to banks that lend money.
The advantage of a mortgage broker is that it has access to rates and loan programs offered by five, 10, or even 20 or more banks. Therefore, a mortgage broker’s customer typically has access to more options than a customer of a particular bank.
Using a mortgage broker isn’t always the right choice. For instance, a bank may give a better rate on a 30-year fixed mortgage than a broker would, or vice versa.
And borrowers may not find it valuable to have access to hundreds of loan options if they are seeking a standard fixed mortgage.
Still, working with a broker can work out well for home buyers and refinancing homeowners.
Whether you choose a mortgage lender or mortgage broker, the more important decision may be the individual you are choosing to handle your loan, independent of whether they work at a bank or mortgage brokerage.
For those looking for a mortgage broker, there are best practices when trying to find a reputable one who will help you accomplish your goals.
Interview At Least 3 Mortgage Brokers
Finding a good fit is similar to locating any other service provider. In this case, ask real-estate professionals, financial advisors, and, of course, friends and family for recommendations.
But don’t accept their word or experience.
Dig deeper, and check credentials of the three you consider. The National Multistate Licensing System (NMLS) has a database of licensed and registered mortgage lenders you can search.
Also, go online with your area’s Better Business Bureau to be sure no complaints have been made against these professionals.
If the broker looks good “on paper,” set up a face-to-face meeting or a phone call. This way you can best listen to what they ask about your finances and goals and make recommendations.
During that meeting, have your broker discuss the following.
- Number of years in the industry
- Which lenders he or she works with
- References from past clients
- Typical closing time frames
You don’t have to take along all your paperwork to the initial meeting. That signals intent, and it may be too easy to comply with the broker’s request to submit a full application. There’s no use applying with a broker whom you may rule out.
Decide before the meeting whether the goal is an initial interview or the start of the application process.
A Qualified Broker Should Ask These Things
If the mortgage broker seems satisfactory up to this point, you can make application for the loan.
But keep your guard up even after you apply. You can continue to analyze how qualified your mortgage broker is without asking that question.
A good broker should ask for detailed financial information such as your bank balances, income, and homes owned. The broker should review your credit report for errors and give you a copy.
In addition, the broker should take note of whether you are married or buying the house with someone else, and whether you would like to show both incomes on the loan application.
Most important, the broker should show you a number of loan rates and options. This is one of the main reasons to go with a broker rather than a lender, after all.
You should ask the broker to provide two or three options from different lenders. Rather than calling three lenders yourself, the broker can show you live rate quotes from multiple lenders at once, as well as the following information.
- Programs that fit your situation
- Benefits of each loan type
- Lock recommendations
- A breakdown of the broker and lender fees
A good mortgage broker should give you options and let you choose. Be wary of brokers who try to force you into one particular program or lender, or refuse to show you options from alternate sources.
The broker may be receiving incentives to “sell” that particular loan or lender.
The only concern should be whether you are getting into the right loan.
The Broker Is Your Access Point To The Lender
The mortgage broker will handle your loan all the way through the process. You as the customer do not have access to the lending institution. It is the broker’s responsibility to ensure a smooth closing.
The broker should ask you for documentation as your loan goes through underwriting and closing with the lender.
This is normal. Lenders may need very specific items from you, and they too must go through the broker to reach you.
Going through a broker rather than a lender may, on the surface, appear to add inefficiencies. There is an extra party in the mix.
But your loan process might even go more smoothly with a broker.
Mortgage broker companies tend to be smaller and often take a more personal approach than would a big bank. A broker may give more attention to your loan file, and better know your needs.
If you make the right decision on your mortgage broker upfront, you should experience a smooth and lower-stress loan process.
What Are Today’s Rates?
Whether you choose a small mortgage broker or large bank, you will find historically low rates.
Get a quote for your home purchase or refinance while rates are low. All quotes come with access to your live mortgage rates, and just a few items are required to start the process.