Questions To Ask Your Mortgage Broker
Ask questions. Lots of them. For example:
- Do you offer loans from a range of different lenders? What sort of lenders do you work with? What kind of lenders can’t you access?
- How do you get paid for the advice you’re giving me? Does this differ between lenders?
- Why did you recommend this loan to me? Why is this loan in my best interests?
- What fees will I have to pay when taking out this loan?
- What features come with this loan? Can you show me how they work?
- How do the fees and features of this loan affect how much the loan will cost me?
- Can you show me a couple more options, including one with the lowest cost?
- What is the threshold for lender’s mortgage insurance and how can I avoid it?
What Is The Interest Rate And Apr
Its essential that you ask your mortgage lender about your interest rate to find out how much interest youll be paying on your loan. Your interest rate is determined by multiple factors, including your credit score, the location of the home you purchase, the size of your down payment and your loan type, term and amount.
However, you should also ask your mortgage lender about the annual percentage rate , because it provides insight into the full cost of borrowing money. The APR includes both the interest rate and the fees that the lender charges to originate the loan.
If youre planning to obtain an adjustable rate mortgage, its also helpful to ask your mortgage lender about the adjustment frequency. Knowing what your adjustment frequency is will tell you how often you can expect your interest rate to change.
Here Are The Three Crucial Questions To Ask Brokers
1. Can you get me a mortgage from any UK lender, right now?
This finds out if your broker can source you ANY UK mortgage. Not all can so it’s important to know which you’re dealing with. Here are some of the possible answers:
- ‘No.’ Some brokers are tied to one lender or operate off a small panel of lenders, so they search fewer deals. This makes it simpler and cheaper for them to operate.
- ‘We check all products available to brokers.’ The key point to note here is the last phrase available to brokers. This used to be called ‘whole of market’. Many of these brokers will exclude lenders and products which are only offered directly to the public, mainly as they won’t receive a commission. On top, they may not be able to submit an application on your behalf.
- ‘We check all lenders.’ Some brokers do check lenders’ direct-only deals too. However, they are more likely to charge a fee. In reality, it’s unlikely a broker could guarantee you access to EVERY mortgage, as exclusive deals can be arranged between lenders and brokers .
Just be clear on what your broker is offering. Weigh up the need to check every deal, your willingness to do some legwork yourself, and if you’re happy paying a broker fee. Once you’ve found a broker you’re happy with, you need to ask them the next questions to find out if they’re the best broker for you.
2. Do you charge a fee?
This tells you how the broker makes their money from your mortgage deal. Brokers have two possible sources of income, which are:
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Home Equity Lines Of Credit
A HELOC is a secured form of credit. The lender uses your home as a guarantee that youll pay back the money you borrow. Most major financial institutions offer a HELOC combined with a mortgage under their own brand name. Its also sometimes called a readvanceable mortgage.
HELOCs are revolving credit. You can borrow money, pay it back, and borrow it again, up to a maximum credit limit. It combines a HELOC and a fixed-term mortgage.
You usually have no fixed repayment amounts for a home equity line of credit. Your lender generally only requires you to pay interest on the money you use.
Evaluate Which Type Of Mortgage Lender Is Right For You
Between local banks, retail banks, credit unions, and online mortgage lenders borrowers have more options than ever. When researching loan options, take notes and stay patient.
Now lets look at available lender types.
Local banks
Smaller mortgage lenders often times offer the same array of loans as larger banks. Youll also enjoy a more familiar, one-to-one experience. Local loan underwriters will remain your point of contact throughout the lending process.
The pros of financing through a local bank:
- As decisions are made in-house at local banks, they have the ability to expedite loan approvals. If youre in a hurry to close, this is very helpful.
- More accessible lending experience because youre nearby. Expect individual attention and personalized assistance on qualifying for a loan rate.
- Smaller lenders can be less rigid than larger banks in terms of the minimum criteria they require to qualify for a loan as they follow different regulatory guidelines. Borrowers whove been rejected by a big bank due to income or credit issues might have better chances with a smaller local lender.
The cons of financing through a local bank:
- Sometimes there can be fewer loan options due to less administrative resources.
- Smaller, local banks also might not have tools like apps and online resources that can make the process of applying for and managing a mortgage more convenient.
Big banks
The pros of financing through a big bank:
The cons of financing through a big bank:
Online
Pros:
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Can Improve Your Credit Score
Any good mortgage broker will want to get you the best rate they can. Since a higher credit score translates to a lower interest rate on your loan, your mortgage lender should point out ways that you can increase your credit score rapidly. Typically, paying off your debt is the best way to bump up your score quickly, but look for a mortgage lender that has more tips and suggestions as to how to get you the highest credit score and the best interest rate possible.
How To Choose The Best Mortgage Lender For You
The “Best Mortgage Lender” will depend on a number of factors that matter specifically to you. There’s a huge universe of mortgage providers out there, and the best lender in one state might not necessarily offer your best terms in another. Even after obtaining a competitive rate quote from one of our top mortgage lenders, it’s a good idea to obtain multiple competing quotes from local mortgage lenders to ensure you’re getting your best deal possible.
The types of lenders you’ll deal with directly will generally take the form of one of the following:
- Banks
- Wholesale and Portfolio Lenders
- Online Mortgage Companies
Remember that checking your rate with multiple mortgage lenders will only count as a single credit pull if completed within a 45- day shopping period. In many cases, checking your estimated rate will show up as a “soft credit pull” and have negligible impact on your credit score. It’s a good idea to get as many competitive rate quotes as you can handle before picking a lender.
While there will be some variation to the application and underwriting process for each lender type, the rates and cost estimates will vary widely depending on your local market. Additionally, you’ll want to compare the following factors when choosing a lender:
Interest Rate
Closing Costs
Customer Satisfaction
Loan Inventory
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How Much Can You Borrow
Mortgage lenders will typically lend between 4 and 5 times your individual income, or 3 to 4 times your joint income if youre applying for a mortgage with someone else. Every lender has different criteria for the maximum amount you can borrow. Affordability is also important: if you already have a lot of debt on credit cards or other loans, your maximum mortgage may be lower.
You should also think about how much you want to pay per month on your new mortgage. If your mortgage repayments are greater than 30% of your take-home income, you may find yourself house poor, where you own a house but cant afford to build up your savings, go on holiday, buy a new car, etc.
Choose A Type Of Mortgage Lender
There are many types of lenders, and they differ from each other in nitty-gritty ways, such as how they access funds for your loan. But as a consumer, you’ll probably look at two main kinds of lenders:
- Direct lenders. You work one-on-one with a direct lender, and the company provides your financing. A direct lender could be a bank, credit union, or lending company such as Better.com or Carrington.
- Mortgage brokers. A mortgage broker is the middleman between you and a lender. A broker helps you compare lenders and find the best deal, but you might have to pay them.
Choosing between these two can be tricky because some lenders work only with brokers, and others do not work with brokers at all. Brokers do a lot of the work for you, but you may prefer to work directly with lenders if you just want to compare a few of your top options.
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Should I Consider Financing With My Original Lender
If you’re considering a refinance, it might seem easiest to turn to your existing lender to ask for a lower rate. This is certainly a possibility you should look into, but keep in mind that other lenders out there may be able to provide a better offer.
Refinancing works by paying off your existing mortgage with a new loan, one that often has a lower APR and better terms. Doing this helps you save money on interest over time, and can also help you capitalize on newly lower interest rates.
Working with your current lender could make the refinancing process much easier since they already have all your information. If you’ve paid on time and proven you’re a valuable customer, that may help you negotiate better terms, including a lower interest rate and closing costs. These savings could be even more likely if your mortgage is only a few years old, as all the paperwork and records for the initial transaction might still be accessible.
However, working with your current lender may also have some drawbacks. If you don’t shop around, you won’t know if other lenders offer better rates and terms. You may also miss out on appealing benefits offered by another lender.
Consider All Factors And Choose The Best Option
As a final thought, while the APR you receive is probably the single most important factor to consider, it’s not the only one. For example, if you have narrowed your search down to two lenders, and one has excellent reviews, always closes on time, and answers your emails within an hour, it may be worth choosing them, even if they’re offering a slightly higher APR.
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Looking For A Lender Start Here
If youre thinking about buying a new home or refinancing, youre probably wondering which mortgage companies offer the best options.
Thanks to the recently released J.D. Power 2020 U.S. Primary Mortgage Origination Satisfaction Study, youll have a strong jumpingoff point for your search.
With a mix of techfirst lenders and major banks earning the highest ratings, there are a variety of options to choose from.
But dont limit your search. Just because a mortgage company gets good reviews, doesnt mean its the best company for you.
You still need to compare rates and fees from at least 35 lenders to make sure youre getting the best deal in addition to great customer service.
Read Every Document Carefully
Read your preapproval letters and loan estimates closely to ensure you understand what you would pay with each lender. If you don’t understand a term or fee, don’t be afraid to ask the company.
Once you’ve chosen a lender, you’ll receive a closing disclosure at least three days before closing. A closing disclosure provides a detailed summary of your mortgage, and you should read the fine print to make sure there are no mistakes, compare it with your loan estimate, and ask any questions.
You may even decide to hire a lawyer to read your closing disclosure, but be prepared to pay several hundred dollars.
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What Is A Mortgage Broker Vs A Mortgage Lender
Before you obtain a loan, you should understand how mortgage lenders and brokers differ, so you know whose assistance you require. A mortgage lender works for a bank or financial institution to determine the qualification of borrowers and provide them with funds. However, a mortgage broker works with borrowers to help them shop around and find the appropriate lender for their circumstances.
Instead of researching different types of loans and lenders independently, mortgage brokers do the work for you. After they find the right loan and lender for your financial situation, they help you gather the information you need to fill out your mortgage application. As a result of the services brokers provide, you pay them a commission, which is a percentage of your ultimate mortgage amount.
Before choosing to work with a mortgage broker, you should understand how they operate. Some mortgage brokers primarily work with specific financial institutions and promote lenders with whom they have long-standing relationships.
Given the differences in their roles, the questions you would ask a mortgage broker are different from those youd ask a lender. Here are some important questions to ask a mortgage broker:
What Are My Estimated Closing Costs
Remember to factor in the various fees associated with buying a homeparticularly closing costs. Closing costs include loan origination fees, appraisal fees and attorney fees , to name a few. Your lender will provide you with a Loan Estimate showing the approximate costs of your loan so you can budget accordingly.
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What Is A Mortgage Broker
A mortgage broker is essentially an intermediary that pairs mortgage customers with lenders. Despite their involvement in this process, brokers do not work for lenders, and therefore do not originate home loans themselves.
At the dawn of your relationship with a broker, he or she will go over your current financial situation. This could include an evaluation of your , as well as a review of your income and other important financial characteristics. The broker does this not only so that he or she knows what types of loans are best suited for you, but also so he or she can apply for loans on your behalf.
Mortgage brokers use two separate types of fee schedules: lender-paid compensation and borrower-paid compensation. So in some cases, the lender you end up with will pay them, but other times you might be on the hook for these fees. There are many factors that go into the rate a broker charges, like the location of your home, the general state of the housing market and more.
Find A Mortgage Lender To Fit Your Situation
Although most home buyers think they should be shopping for the best interest rate, pricing is very similar between lenders. Its usually the type of home loan you get and the loan terms you choose that save you the most money.
To qualify for the lowest rates and fees available today, you need excellent credit and a substantial down payment. Without those two things, a lender who can work with your personal situation becomes even more important.
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Mortgage Broker Questions To Ask
Before you choose a mortgage broker, make sure he or she satisfies a number of criteria. Youll want to consider if you need a mortgage broker at all. In general, most homebuyers go direct to lenders. Using a mortgage broker has fallen out of favor in recent years, mainly due to the added cost of a middleman, as well as changes the financial crisis sparked.
But if you want a mortgage broker to sort through lender options and do much of the work for you, it can be worth the cost. To help you with your decision, take a look at our list of questions you should ask when speaking with a mortgage broker.
How We Chose The Best Mortgage Lenders
Our rankings were determined based on the following categories:
- Types of loans offered: We favored companies that offered a variety of loan options, such as fixed- and adjustable-rate mortgages, term-lengths, and loans backed by government agencies.
- Customer experience: We favored companies that consider alternative credit data, provide a streamlined application process, at least two forms of customer service, and a variety of resources and educational tools.
- Reputation and transparency: We evaluated consumer complaints with the Consumer Financial Protection Bureau and the number of regulatory actions filed with the Nationwide Multistate Licensing System
Over the course of our research, we consulted the following expert sources:
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Are There Any Other Costs Or Fees I Should Know About
As you approach the closing date for your purchase your lender will calculate the total amount of money you will need to complete your transaction and provide that to you in the form of a Closing Disclosure. This will include the closing costs shown on your Loan Estimate plus any prepaid items like mortgage interest, property taxes, and homeowners insurance. Its a good idea to compare the Closing Disclosure to the Loan Estimate you received.
How To Choose A Mortgage Lender
When thinking about how to find a mortgage lender, ratings can be a great place to start. If millions of other homeowners are singing a lenders praises, its probably worth checking out.
But rankings are just that a place to start.
The right lender for you might not be one of the national banks or even appear on a bestof list.
You might be better off looking at local banks or credit unions that are handson throughout the loan process or who will work with you to help you qualify for a mortgage.
Thats especially true if you think youll have trouble qualifying for a home loan maybe because you have a lower credit score, high debts, or nontraditional income.
Whatever the case, its crucial to find a lender that knows how to work with borrowers like you and can offer low rates for your situation.
Think about your unique needs
There are a number of factors that influence whether a lender will approve you for a loan.
Sometimes a smaller company has more bandwidth to help borrowers who have low credit scores or a limited credit history.
Lenders may also specialize in a particular type of loan or may work primarily with a certain type of borrower.
- Some are known for doing jumbo mortgages, which exceed the loan amount guaranteed by the government
- Others work with bad credit or selfemployed borrowers who might have a hard time qualifying for a mainstream loan
- Still others do a large number of FHA, VA, or USDA loans and can offer expertise in those areas
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