What Is A Mortgage Broker And How Does Mortgage Brokerage Work?
Are you still undecided about using the services offered by a mortgage broker or even skeptical as to what a mortgage broker can even do for you? This article’s purpose is to educate you on how mortgage brokerage works, who a mortgage broker is and why you need one. We believe that after reading this, you will have a much better understanding about the services offered by a mortgage broker and consider using one for your mortgage financing needs.
So, what Exactly Is a Mortgage Broker?
Unless you do not live on planet Earth, you have probably come across the term “mortgage broker”. You may have heard good things and bad things been tossed around this topic. Regardless of what you might have heard, a mortgage broker is basically a middleman between a homeowner or lender and the mortgage lender or bank. Mortgage brokers work with both the lenders and the bank to help the borrowers qualify for a mortgage.
How Does Mortgage Brokerage Work?
Once you make contact with a mortgage broker and agrees to work with you, they will gather essential information such as employment documentation, income, the asset as well credit information. This is similar to the things a bank would require when giving you a loan.
Once you have given the broker all the important details, they will then determine what will work best for you. This includes setting an appropriate loan amount as well as determining which type of loan is ideal for you. Well, of course, you can decide on all this yourself if you choose, but the broker is there to help in getting you the best package.
When all the above has been polished, the mortgage broker will submit the application to a lender and work with them to gain approval. During the application process, they will communicate with you and the bank to make sure everything goes smoothly (like earlier mentioned, they work as middlemen). In fact, when you use a broker, you will not work directly with the lender and all correspondence will pass through the broker.
A mortgage broker earns money by charging a certain commission on the loan or even through upfront payments. Ideally, they can offer no cost loans through the use of a lender credit which will raise your interest rate on the loan but effectively eliminate the out of pocket costs.
How to pay your broker is upon you to choose, and you should, therefore, consult your broker and discuss the options before proceeding. What they charge varies greatly and so, it is imperative that you do your homework before working with a mortgage broker.
Why Use A Mortgage Broker?
Many homeowners try to shop their won mortgage by going in and out of the major lending institutions in the search for the best rates. However, this can be very time-consuming. Using the services of a mortgage broker will save you a lot of your valuable time as they will be in charge of finding the loan on your behalf. This way you can spend your time on something more productive.
One of the major considerations when it comes to shopping mortgage loans, is the credit score. Every time you to a bank or a lending institution, they are most likely to make a credit inquiry. Keep in mind that too many inquiries can negatively affect your credit score but mortgage broker will only make one inquiry and then forward it to the banks they are shopping.
The Best Rates
By using a mortgage broker, you are guaranteed that you are getting the best rates available. Mortgage brokers will only be on your side, and so they will only find you the best rates available. In addition to this, most banks will offer special rates to mortgage brokers only as a reward for bringing them millions per year in business.
In most cases, a mortgage broker will have your mortgage loan application approved within 24 hours at the best rates. And even though most banks approve individuals mortgage loans fast, it can sometimes take weeks trying to negotiate then down to the best rates.
Hopefully by now you are more educated than you were in the field of mortgage brokerage, how it works and how you can benefit from it. If you were skeptical about using one, now I am sure you have made a decision on what to settle for.