Should You Become A Mortgage Broker
NAMB president and independent broker talk through the benefits, challenges of charting your own path
There might just be something to calling yourself a mortgage broker. After a banner refi year in the industry, which seems to be followed by a banner purchase year, even young originators and loan officers feel like theyve accrued about a lifetimes worth of experience. Many are considering the next move in their careers and the flexibility and independence of opening your own brokerage has its appeal, especially as the broker channel steadily grows to take up more market share. Nevertheless, its a big decision and going it alone as a broker should be cause for serious self-reflection.
You have to ask yourself if you want to be independent and ask yourself how long you have been in the business, said Kimber White , president of the National Association of Mortgage Brokers . I think If youre younger, and maybe just have two- or three-years experience, being a broker might not be what you want right now. You might want to work under a company, or a broker shop as you prepare to go independent, because there are a lot of pros to it.
Do Mortgage Brokers Get Better Rates
Yes, they can potentially get you more favourable interest rates than the ones youd end up with if you went directly to a mortgage lender. This is because going straight to a lender without seeking professional advice first means you would only have access to their products and risk missing out on a more suitable deal available elsewhere.
This is the main reason why youre more likely to end up with a better interest rate if you apply through one of the advisors we work with. They have whole-of-market access, so all of the best deals that you qualify for will be within reach if you decide to work with them.
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?
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Is It Easier To Get A Mortgage Through A Broker
Maybe. A broker may have access to loan options and rates you wouldnt find on your own, and they can help you through the application process. But its not necessarily easier to qualify for a loan. Lenders will still assess your credit score, debt-to-income ratio, income and down payment to determine whether you qualify.
Get A Written Quote From The Broker
A written quote tells you the:
- type of loan
- current interest rate
- fees you have to pay
Make sure you’re comfortable with what you’re agreeing to. Ask more questions if there’s anything you’re not sure about.
Never sign blank forms or leave details for the broker to fill in later. If you feel you’re being pressured into signing, ask for more time to think about the loan. Or go to another broker.
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How Do I Get Mortgage Advice
Once you have chosen an adviser, get in contact with them to arrange a good time to talk through all your personal information. Some mortgage brokers have online questionnaires which you can fill in yourself.
Be prepared to answer lots of questions. This isnt an exhaustive list, but the adviser will want to know about your:
- where your deposit has come from
Your answers to these questions should generate a mortgage in principle which gives you a rough idea of the amount you can borrow. You can take this document with you to house viewings.
Bear in mind that you dont have to use the same broker you got a mortgage in principle with.
Once you have had an offer accepted on a house, speak to your adviser. They are likely to ask you even more questions about your finances so that they can recommend a suitable mortgage.
They should be able to guide you through the mortgage application process and tell you what documents you need to provide when choosing a mortgage.
Should You Use A Mortgage Broker
Legislative changes have resulted in a tightening of the rules with regards to mortgage affordability checks, the qualifications of mortgage brokers and the information they must provide to borrowers about their services and fees.
Since the changes, both lenders and brokers must consider your financial situation and assess your affordability when suggesting suitable mortgages for you. They must also be able to prove they have done this.
Whilst this legislative revolution has made it harder to obtain a mortgage, its also made it far safer to use a broker. You can now trust they will undertake a full comprehensive financial assessment and therefore point you towards a range of mortgages you will almost certainly be eligible for.
With the huge expense of buying your first home or moving house, it may be tempting to consider what looks like the cheaper option of applying for a mortgage with your own bank, or by going direct to another lender for your mortgage.
However, avoiding paying broker fees now could cost you thousands of pounds over the next few years if you end up with a worse mortgage deal than a broker could secure for you.
Even if you are pretty clued up about the mortgage market, you might be missing a trick by not using a broker, as some of them have access to a larger range of mortgages and exclusive deals with lenders.
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So Is Hiring A Mortgage Broker Worth It
After reading this article, you have a good idea of how mortgage brokers work. While using a broker has many benefits, there are certain drawbacks too. Ensure you carefully think it through and weigh your options.
Hiring a mortgage broker may be worth it in some cases while in others not. Why not get a quote from both your existing financial institution and at least one mortgage broker? That way, you will have more options and get the best chance at getting the lowest possible mortgage rate.
They May Have Access To More Lenders
Mortgage brokers often work with a variety of lenders. Some brokers also have relationships with lenders that dont typically work with the public. Due to these relationships, brokers know which mortgage companies to turn to to get the best shot at getting you the best loan, and they may have access to more loan products than you would on your own.
Brokers essentially screen clients and usually only send in loan applications for borrowers they believe will get approved. This helps lenders cut down on applications that dont lead to mortgages. For these reasons, some lenders rely on referrals from brokers to fuel their business. Without a broker, you wouldnt be able to get estimates or mortgages from these lenders.
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Check The Broker Is Licensed
Before meeting with a broker, make sure they have a licence to give you credit advice.
Search the following lists on ASIC Connect’s Professional Registers:
To search, choose the list name in the ‘Select Register’ drop-down menu.
If the broker isn’t on one of these lists, they are operating illegally.
How To Find A Good Mortgage Broker
Shopping around is your safest bet to find a broker who has the knowledge to support your home buying needs and the right personality. Ask for referrals from family, friends, or seasoned real estate agents. Talk to people who have recently bought homes and research reviews. However, ensure you evaluate the broker, not the brokerage company.
When youre researching reviews, make sure you look at third-party reviews for the individual originator as they can see how the broker is treating clients and what kind of services theyre providing. Third-party reviews are comments and ratings on sites like Google and Yelp, whereas first-party reviews are gathered and shown on the brokers website.
Interviewing brokers may also assist you in finding the right combination of professionalism, personality, responsive communication, and trust. It can tell you about the service quality and the mortgage process flow.
Ensure you ask how often the broker closes on time and how he or she is paid so you can compare fees and negotiate. Finally, consider how each broker connects and communicates with you.
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How Do Bank Mortgages Work
Getting a mortgage from your bank or credit union is a simpler process. You complete a loan application, meet with a loan officer and review your available choices. Your bank or credit union may have excellent options for you, and getting a home loan through your own financial institution may qualify you for relationship perks like free checking.
On the downside, working with one bank limits your choices. The bank next door might offer a better deal, but you won’t know about it if you only talk to your bank. That could be important if your for a better rate at one financial institution over another. Even a small difference in your interest rate can cost you tens of thousands of dollars over the life of a 30-year mortgage.
Again, doing your homework is key. Learn more about qualifying for a mortgage and consider which factors might affect your loan approval, rates and fees. Familiarize yourself with going interest rates and see how your bank’s rates line up. Armed with this knowledge, you’ll have some idea whether or not you’re getting a good offer from a bank. Do you have doubts? You can always shop around with other lendersand a mortgage brokerto see what they have to offer before you sign.
Which Is Best For You
If you have an excellent credit score and your financials are in order, a bank is likely your best bet, particularly if you have been a customer in good standing with that institution for a long period of time. They know you, you know them, and they may wish to reward your business with favorable rates and conditions of the loan.
On the other hand, if you are dealing with less than perfect credit or other difficulties in providing a clear and complementary picture of your financial situation, a broker may be the way to go.
Your financial situation isn’t the only factor to consider. So is the type of property you wish to purchase. Some lenders will only work with consumers who want to buy single-family homes and not those who wish to purchase an apartment building or a co-op. A broker will already have the knowledge about which lenders work with borrowers to purchase specific types of properties. This is part of the reason why brokers will sometimes charge more for their services.
It’s up to you, the borrower, to weigh all of these options, the pros and cons of each, the fees and costs anticipated, as well as the willingness to do more of the work yourself before committing to either a broker or a direct lender for your loan.
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They Might Charge A Broker Fee
Some mortgage brokers may charge you a fee for their work. This should not be a hidden fee it should be disclosed upfront so you understand what it is.
Because lenders working with brokers usually experience a smoother process, you may get a discount on your loan by going through a broker. But if the lender you use doesnt offer a broker discount and you have to also pay a broker fee, then you may end up paying more for your mortgage than if you applied through the lender directly without the brokers help.
How Do Mortgage Brokers Work
A mortgage broker acts as a middleman between you and lenders when you’re shopping for a home loan. Most mortgage brokers work with a variety of lenders, including banks, credit unions and private mortgage companies, which allows them to offer you a wider range of choices. If you have less-than-perfect credit, are self-employed or have any other special circumstances, this extra flexibility can help you find the best fit.
Having a great mortgage broker is like having a great real estate agent: They get you results you couldn’t easily get yourself. Mortgages have a lot of working parts: interest rates, down payments, origination fees, points and more. A good broker can help you understand how these variables work together and what makes one loan a good value compared with another.
But be aware: Mortgage brokers work on commission from lenders. For that reason, they may have an incentive to sell you a bigger loanor steer you toward one lender over another, regardless of what’s best for you. Some mortgage brokers may charge you fees, but a great broker will be forthcoming with both loan options and good information. To help ensure that your mortgage broker is working hard for you, consider these three tips:
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They Might Have Less Access To Lenders
Believe it or not, some lenders dont want to work with brokers to get more business. A lender may not want to pay the commissions and fees brokers might charge. Other lenders may not want to deal with the hassle of working with non-employees to originate mortgages.
Whatever their reasons, these lenders wont be accessible to you if you solely work through a broker. For this reason, it may still make sense to do some rate shopping on your own in addition to the offers the mortgage broker sends you. This way, you can make sure youre getting the best overall deal.
Find Lenders That Work Specifically With Bad Credit
For anyone with bad credit, unfortunately, this adds a whole other layer of stress and frustration to the house buying process. Not every lender is willing to work with you, and often the ones that will give you a mortgage will only do so at a shockingly high mortgage interest rate. This is where a mortgage broker can come in extremely handy. Because mortgage brokers have a network of lenders, they can find you a much better deal.
If you are in search of a bad credit mortgage specialist who can speak to you, give you advice, and guide you, then you need to visit OnlineMortgageAdvisor. They are used to working with clients who have been told they dont qualify for a mortgage due to their bad credit. Bad credit mortgages are what they specialise in advising on and there is nothing they havent heard before.
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Are Mortgage Brokers Still Worth It
If you are buying a home or remortgaging should you go it alone or use a mortgage broker? We highlight how to find the best mortgage deal, direct or with a broker.
Mortgage hunting: Use a broker or go direct?
Should you use a mortgage broker? Once upon a time the choice was easy, mortgage brokers could find you the cheapest deals and stop you having to trek round the banks and hit the phones.
Now, some of the best rates aren’t available through brokers and you can search the internet in minutes for the cheapest deals.
So is a broker still worthwhile? We take a look.
Some of the best mortgage deals of the past two years have not been accessible through brokers. Some banks and building societies no longer offer products through brokers and that means many borrowers are questioning their use.
Meanwhile, the rise of the internet comparison means that borrowers can check what the cheapest rates are in minutes.
The banks that only deal direct, such as HSBC, its offshoot First Direct, and the Post Office, say they do this to give customers the best deal and cut out the middle-man.
In other cases, some lenders – including big names like Lloyds and Britannia still use brokers but may offer some deals exclusively to those arriving direct.
Why use a mortgage broker?
Mortgage brokers will search for the best mortgage deal for you and one that fits your circumstances. They can also give you advice on what mortgage to choose.
Why go direct?
Or why not do both?
A Broker’s Interests May Not Align With Your Own
Your ultimate goal in shopping for a mortgage is to find one with an affordable interest rate and low fees. You’re in it for the long haul and need to protect your financial interests.
A mortgage broker, on the other hand, often gets a fee from the lender for bringing in business. This fee can be based on the amount of the mortgage and will vary among lenders. A broker’s goal, therefore, may be to get you into a mortgage that maximizes their compensation. The 2008 market crash revealed that many brokers were getting their clients into mortgages that they could not afford over time.
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