April 19th, 2016 5:48 AM by Jackie A. Graves, President
You’ve narrowed down the search to find your dream home,
and now you’re on the hunt for the best mortgage to put those keys in your
hand. One way to do it: Work with a mortgage broker who can shepherd you
through the intricate lending process from start to finish.
You’ve probably heard the term “mortgage broker” from your
real estate agent or friends who’ve bought a home. But what exactly is a
mortgage broker and what does one do that’s different from, say, a loan officer
at a bank?
Here are answers to five of the most common questions about
1. What is a mortgage broker?
Think of a mortgage
a middleman between you and potential lenders. The broker’s job is to
work on your behalf with several banks to find the loan with the most
competitive terms and lowest rate that best fits your needs. People often use
“mortgage broker” and “loan officer” interchangeably but they aren’t the same.
(We’ll explain later.)
In general, mortgage brokers are licensed and regulated
financial professionals who have a well-developed stable of lenders they work
with. They do all the legwork — from gathering documents from you to pulling
your credit history and verifying your income and employment — and use the
information to apply for loans on your behalf with several lenders in a short
Once you settle on a loan and a lender that works best for you,
collaborate with the bank’s underwriting department, the closing agent (usually
the title company), and your real estate agent to keep the transaction
running smoothly through closing day.
Like most sales professionals, mortgage brokers charge a
commission for their services. They typically charge a “loan origination fee,” which is about 1% of the loan amount and is
paid by the borrower at closing. Sometimes, though, mortgage brokers
negotiate no-cost loans so you don’t have to shell out extra money up front;
the broker will instead be paid by the lender after the loan closes. However,
choosing a no-cost loan to minimize your out-of-pocket expenses means you’ll
pay a higher interest rate, which costs more over time.
So what makes loan officers
different from mortgage brokers? Loan officers are employees of a lender and
are paid a set salary (plus bonuses) for writing loans for that lender.
Mortgage brokers, who work within a mortgage brokerage firm or independently,
deal with many lenders and earn the bulk of their money via commissions.
The larger the loan amount, the higher the broker’s commission will be.
For starters, a mortgage broker acts as your personal loan
concierge and does all the work for you. The broker applies for
loans with different lenders on your behalf, finds the lowest rates, negotiates
terms and makes the approval magic happen.
Most mortgage brokers have relationships with several local,
regional and even national lenders, and they can tap those connections to
get some loan fees waived for you. A mortgage broker will give you
accessibility and one-on-one attention you likely won’t find when working
directly with a loan officer at a large bank.
Another perk: Some banks and lenders work exclusively with
brokers, and that positions you to get qualified for certain loan products if
your mortgage broker has a good relationship with those lenders.
You’ll also save time by using a mortgage broker; it can take
hours to apply for different loans, and then there’s the back-and-forth
communication involved in underwriting the loan and ensuring the transaction
stays on track. A mortgage broker can save you the hassle of managing all those
costs about 1% of your loan amount to pay a mortgage broker to shop lenders for
you and assist in processing your loan. In other words, if you’re borrowing
$300,000, you can expect to pay about $3,000 in loan origination charges to
your broker. But if you’re thinking of shopping lenders yourself, keep in mind
that it takes a lot of time, effort, communication and savvy to navigate the
complexities of the process.
broker can also narrow your access to some large lenders. In the aftermath of
the housing collapse, some large banks stepped away from wholesale mortgage
lending and stopped working with mortgage brokerage companies.
get around this potential roadblock by working directly with an individual
lender, especially if you already do your personal banking with that lender.
Who knows? You might be able to negotiate better terms and a lower rate. That
said, brokers have the ability to comb the marketplace to provide you with a
variety of loans to choose from. If you go directly to a bank yourself, you
will be limited to the products the bank offers.
go your own way, contact at least three lenders; don’t automatically take the
first loan offer.
The best way is to ask friends and relatives for referrals, but
make sure the referring friend has actually used the broker and isn’t just
dropping the name of a former college roommate or distant acquaintance. Learn
all you can about the broker’s service, communication style, level of knowledge
and approach to clients.
Another great referral source: your real estate agent. Ask your
agent to give you the names of a few brokers that he or she has worked with and
trusts. Some real estate companies offer an in-house mortgage broker as part of
their suite of services, but you’re not obligated to go with that company or
choose the right mortgage broker, it’s wise to interview at least three people
to find out what services they offer, how much experience they have, and how
they can simplify the process. Don’t forget to check your state’s professional
licensing authority to ensure they have current mortgage broker’s licenses in
good standing. Also, scope out online reviews or check with the Better Business
Bureau to make sure the broker you’re considering has a sound reputation.
If you don’t have the time, patience or know-how to navigate the
lending process on your own, talk to a mortgage broker who’s experienced and
comes highly recommended. Don’t be afraid to ask questions and learn about each
step in the loan process; you’ll walk into your closing with more confidence
By DEBORAH KEARNS - To view the
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