When working with a mortgage broker, you will get access to different home loan programs from a number of lenders. Mortgage brokers, who may work for a mortgage broker company or independently, deal with a number of lenders in order to secure loans for their mortgage broker clients. In addition to shopping around for a mortgage, mortgage brokers help walk you through the mortgage process, talk with lenders, and even file paperwork on your behalf. A broker’s job is to compare mortgage lenders on your behalf and look for the best interest rates for your needs.
Mortgage broker’s commissions, or fees, are typically paid by the lender once a loan has closed, so working with the broker should have no impact on what the loan costs. If fees are paid by the lender, you need to worry about whether you may be steering toward a more expensive loan because a broker’s commission is more profitable. Some brokers take that commission from your lender; others take it from you (it is folded into your closing costs).
You can expect to pay things like a real estate agent’s or broker’s commission, application fees, appraisal fees, title and insurance searches, closing costs, and more. Brokers who charge commissions get this on top of their acquisition fees, and it is an absolute myth that you are going to get better service if you are paying. Borrowers are encouraged to shop around for finance brokers and should ask what they can expect to pay in fees, which are usually between 1% to 2% of the loan amount.
Ultimately, it is up to you to find the best mortgage lender, either through a broker or loan officer, and to shop around to get the best rates and lowest costs. Always speak with multiple sources to find the best mortgage deal that you can.
By working through a broker, you might not get access to those lenders, and some may be able to give you better mortgage terms than what you would be able to get through the broker. Working with a mortgage broker for your home loan could have a major impact on what programs you are able to qualify for. Working with a mortgage counselor also gives you that access and personalized assistance that you do not get working with a lender directly.
Much of the information and communication between you and your mortgage adviser can take place online, meaning that you will not have to even leave the house. Credible can hook you up with a loan officer, or they can take you through the mortgage application process completely online. Instead of being directed in one particular direction, an online brokerage such as Credible can give you a list of loan options that are qualified, and you can easily compare mortgage options and pick what works best for you. Some brokers, such as Credible, are based online, and they allow you to easily compare several commercial loans at once and then select the one that is best for you.
A mortgage broker, on the other hand, can match borrowers to loans from different lenders, and in many cases, helps them find the best-fitting loan (and one that is more affordable) for their needs. Once a mortgage program is decided upon, the mortgage broker handles the entire process, from pre-approval to closing, by coordinating efforts among lenders, real estate professionals, and title companies.
Once you decide on the loan and the lender that is right for you, your mortgage broker works with the bank’s underwriting office, the closing agent, typically a title company, and your realtor to make sure that your deal runs smoothly until closing day. A mortgage broker works with everyone involved in the loan process — from real estate agents to underwriters and closing agents — to ensure the borrower gets a better loan and that the loan is closed on time.
Your broker then submits an application to the lender and will handle all of it right up to when the lender sends out the mortgage offer. Once you find your house, and your offer has been accepted, your broker will do some shopping around on the market for you in order to get the best deal. They will even show you how they sourced this item, they will let you know if there is something better for you, and of course, if a broker cannot get you that item, then you may want to approach a bank directly. A mortgage broker compares loan types, offers, and interest rates on a buyer’s behalf, and does most of the negotiating work with lenders on their clients’ behalf.
When buying a house, you may want to look at several lenders and pick one that accepts your credit and down payment, or the one with the best rates. Reputable lenders especially will want to know more about you before throwing away loan options.
The first thing lenders are likely to do when you apply for a home loan is looking at your credit; you should, too. Remember, every time you apply for credit, including for a mortgage, a hard inquiry made by a lender shows up on your credit report and temporarily drags down your score. Applying for multiple mortgages within two weeks counts only as a single inquiry, but if you drag out and go through as many lenders as possible for an extended period, you are ultimately hurting your score, potentially leading to lower rates than you would have liked.
You may be able to save some time by using a mortgage broker; applying for pre-approvals at several lenders can take hours, and then there is the back-and-forth that goes into completing a loan application and making sure that the deal stays on track. It can take hours to complete the mortgage application, collect all of the required paperwork, and then speak with a lender directly while trying to borrow money to purchase a house. Working with a knowledgeable mortgage professional can help take a lot of the pressure off, and make sure that your loan application process is successful.
Or, it could come at an origination fee, or even through a yield spread premium (YSP), which is the commission that the bank or lender provides in return for the above-market mortgage rate.