Mortgage Broker Tips
A mortgage broker works as an independent intermediary who brokers mortgage loans for people or companies. They obtain the mortgage loans from lenders and then help people looking for a loan to apply for those loans. People who need mortgage assistance can approach a broker, who can look into their needs and help them find a loan that will suit them. The brokers earn money when a loan is successfully obtained. The broker’s fees depend on the amount of loan that is obtained and the broker’s commissions may also be included in these fees.
An intermediary is not a lender. The main function of a mortgage broker is to obtain mortgage terms from potential lenders. The mortgage banker will require potential borrowers to fill out an application form that will include personal information such as their income and their credit score. This information is used to match it with data on borrowers in the mortgage banker’s lending database. Mortgage bankers keep up to date copies of this information so they can make informed decisions on which borrowers to lend money to based on their current financial circumstances.
In order to complete an application process with a lender, mortgage brokers must first be approved by the lender for access to the lender’s lending database. This application process will usually take a few days. After approval, the borrower must provide a number of documents such as pay stubs, bank statements, pay stubs from their last few job positions, and any proof of income from other sources. These documents are required because they will be needed for any reference checks that the mortgage broker makes on the borrower and on potential lenders once they are admitted to the lender’s lending system. Before they are granted access to the database, however, these lenders will usually want to see proof that the borrower has been saving for at least six months and has a steady job.
Some mortgage brokers work as independent agents who get referral fees for bringing borrowers to specific lenders. The middleman title is particularly popular with borrowers who need to find multiple lenders for their individual loans. In this scenario, the mortgage brokers work off a commission, taking a small portion of the total amount the lenders pay out. Because the commissions vary depending on the lender that the borrower referred to and depends on how large that loan is, this setup can be quite profitable for the mortgage brokers.
Another way in which mortgage brokers can benefit the borrowers is through negotiating certain terms on the loans. For example, a mortgage broker may be able to negotiate interest rates lower than what is offered by local home mortgage lenders. This is important because of the high cost of mortgages in recent years. While some borrowers have been hurt by the recession, others have been helped because of it. A mortgage broker can use this to their advantage in lowering the interest rates, which means more money for the borrower each month.
The third way in which a mortgage broker benefits the borrowers is by providing them with useful information about the entire mortgage loan process. Brokers receive a commission on the interest rate the bank offers, which is part of the cost of lending money. However, they do not get any benefit from the early repayment penalty or the balloon payment in many cases. With the economy the way that it is, many borrowers with good credit are being encouraged to take out larger mortgages to help cushion the blow of bad financial times. With the help of a broker, these borrowers can negotiate for smaller interest rates or better terms, allowing them to repay their mortgage loan more easily when their circumstances change.
Finally, mortgage bankers will sometimes write mortgage documentation for a fee. Because most banks hire outside companies to provide them with this documentation, there is a lot of potential for a borrower to be taken advantage of by a broker who is writing the documentation. For example, the broker may know a specific formula used by banks to calculate their interest rate, making it easier for the borrower to borrow money at a low rate than what the bank would offer. Because a borrower would not be aware of this fact when asked for a copy of their mortgage documentation, a broker can use this as a weapon against the borrower.
It is important for borrowers to be aware of the fees that are charged by mortgage lenders and brokers. There are often hidden costs, which the borrower must learn about and ask questions about before signing a mortgage contract. Once a person has this information in hand, they can negotiate the best mortgage terms for themselves and their family.