There are many moving parts and various people you’ll deal with throughout the homebuying process. Depending on how you decide to find your lender, one of the professionals you might end up working with is known as a mortgage broker.
In this article, we’ll break down what a mortgage broker does and how working with one may assist you in your search for the perfect home. Let’s start by defining mortgage brokers and explaining what they do.
New to the homebuying process? Read our complete beginner's guide to buying a house here.
A mortgage broker is a licensed professional who helps homebuyers find a mortgage lender to hire and help them finance their homes. The mortgage broker does not provide the loan itself, but instead, the broker works as a kind of middleman.
Mortgage brokers bring the two parties together and look for loan options that will fit the buyer’s financial needs.
If you work with a mortgage broker as a way of finding a mortgage lender, they will start the process by looking over your financial information. This will allow them to understand how much you can afford to spend on a house and what type of loan will be the best fit for you.
This is similar to the process that you would go through with a lender when they gather your information for a pre-qualification letter. It’s smart to gather your personal information such as your income, current debt, and credit history. Put all of this information somewhere that is easy to access because it will help to expedite the process.
Your mortgage broker will use this information to determine what your overall loan will look like. Brokers will then get quotes from several different lenders that fit what you’re looking for and compare the rates. Once you and your mortgage broker have figured out which of the quotes is best for you, the broker will submit an application to that lender.
Eventually, a lender will approve you for the loan, and once you have secured the loan from your lender, you will move forward with the process and close on your home as usual. When you close, either you or the lender will pay the broker an origination fee.
This is how the mortgage broker makes their commission. They are paid in the form of an origination fee only if you choose to successfully close on a home thanks to a loan that the broker sourced for you.
As you can imagine, there are both pros and cons of hiring a mortgage broker. While they bring a lot of expertise to the process of searching for a loan, it’s always important to be aware of the ways in which a mortgage broker might not work in your best interest as well.
We wrote a blog all about the unexpected costs that may come with a mortgage, read it here!
Read our blog all about the fees and costs associated with closing a mortgage here!
It’s easy to search the internet and find mortgage brokers near you. However, vetting them and figuring out their intentions is important, even though this can be a time-consuming process. If you can, seek out referrals from friends or family members.
Just as it’s good to shop around for lenders, it’s also smart to find two or three mortgage brokers whom you can interview. Additionally, compare the rates of all of the lenders you’re considering to see which one financially is a better fit for you. That way, you’ll be able to be confident in knowing that you have a trusted professional on your team.
It’s important to not confuse mortgage brokers with loan officers. Loan officers can also help you understand what interest loans you qualify for, but they work for a bank or as part of a lending institution. Mortgage brokers work independently for their customers, meaning they will have your best interest in mind instead of a company’s best interests since they are not affiliated with any institution in particular.
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Mortgage brokers act as middlemen between borrowers and lenders. They help borrowers find loans that work best with the borrower’s financial needs and constraints.
While either the borrower or the lender will have to pay an origination fee at closing, the expertise that mortgage brokers bring to the mortgage loan search process can be invaluable in sourcing great options for the borrower. Comparing and interviewing an array of mortgage brokers before working with them can ensure that the borrower is working with the right mortgage broker for them!