What Is a Mortgage Broker?

Most people cannot afford to buy a house with cash, so when looking to buy a new home, they know they must locate a mortgage loan as part of the home-buying process. A mortgage is a legal contract for a loan secured by a lien on real property. A bank or other lending institution loans money to a prospective home buyer, the debtor, for the purpose of buying real property. The lender, or creditor, then takes title to the debtor’s real property to secure the loan.

Once the loan is paid in full, which can take as long as 30 years, the title transfers to the debtor, who then owns their home free and clear. Most individual homebuyers obtain a mortgage in order to purchase a home they use as their primary residence.

Even after a purchase, a homeowner may decide to mortgage their property by obtaining a new line of credit. Or a home buyer may refinance their mortgage loan, shifting to a different lender who offers a lower rate of interest or better terms, e.g. a shorter time for paying back the loan.

What Does a Mortgage Broker Do?

Mortgage brokers are licensed, regulated professionals who provide a financial service for a fee. They work with a variety of banks and credit unions, so they can help an individual buyer by giving them several loan options when they are in the market to buy real estate.

Instead of a home buyer going to a number of different banks or creditors to apply for a loan to buy a house, they can hire a mortgage broker to find the best possible loan for their particular circumstances. Depending on a person’s income and credit rating, hiring a broker can help streamline the search process and sometimes get the buyer a better deal on a mortgage loan than they might find on their own. A mortgage broker probably knows more about the mortgage market place than the average home buyer.

Mortgage brokers can:

• Research a variety of loan options;
• Compare interest rates;
• Originate a loan;
• Work with real estate agents, lenders, and the buyer to manage the buying process; and/or
• Gather and organize all of the financial documents that are required for completing the buying process.

Are the Services of a Mortgage Broker Expensive?

Mortgage brokers are licensed and regulated financial service providers. They work with a variety of lenders or banks, so they can help an individual buyer by giving them several loan options when buying real estate.

Instead of a buyer going to multiple banks or creditors requesting a loan to purchase real estate, a buyer can hire a mortgage broker to find the best option for their particular circumstances. Depending on a person’s income and credit rating, hiring a broker can help streamline the search process and sometimes offer a person a better deal than what they might find on their own. A mortgage broker knows more about the mortgage market place than the average

Mortgage brokers can:

• Research a variety of loan options;
• Compare interest rates;
• Originate a loan;
• Work with real estate agents, banks, and the buyer to coordinate the buying process; and/or
• Gather and organize financial documents needed for completing the buying process.

What is the Difference Between a Mortgage Broker and a Mortgage Lender?

A mortgage lender is a bank or creditor who provides the loan to purchase the property. A mortgage broker is an agent that can assist a buyer by locating a range of loan options from different lenders, banks or credit unions, including information about different rates and loan terms. Think of a broker as a person who finds and connects the lender with the buyer.

What are the Advantages of Using a Mortgage Broker?

The advantages to using the services of a mortgage broker to find a mortgage loan are as follows:

• A broker has access to a variety of lenders and is informed about rates, terms and whether a person qualifies for their products;
• Brokers may be able to find a particular loan or interest rate that is not available from a traditional bank;
• They can help a buyer manage the gathering up and submission of documents to various lenders. Anyone who has applied for a mortgage loan knows how onerous it is to gather up and submit to lenders the documentation they demand. A broker can help manage this process and make it less burdensome to the home buyer;
• An experienced broker can help the closing process proceed more efficiently.

Are there any Disadvantages in Using a Mortgage Broker?

Of course, there are some disadvantages as well to mortgage brokers. Some disadvantages that a prospective home buyer should consider are as follows:

• Some buyers may get a better interest rate on their home loan at a traditional bank than what a broker can obtain;
• Brokers are third parties, so they may have less control over a person’s application for a loan than a mortgage banker at a particular bank would have. There are some things they may not be able to do for a person when handling their loan application;
• An inexperienced or less skilled broker may create problems rather than solving them;
• A person may pay a broker fee for a loan they could have found on their own for free.

How Do I Determine If My Mortgage Broker Is a Reputable One?

Before hiring a mortgage broker, a person should perform their due diligence on the individual broker. Even after a person hires a broker, they should still do their own research on loan rates and terms in addition to reviewing carefully the products the broker has to offer.

A person should be sure to go through the following before making a final decision on a mortgage broker or a loan:

• Make sure the broker is licensed on the Nationwide Mortgage Licensing System & Registry;
• Check to see if the broker has had any disciplinary actions filed against them by contacting the mortgage broker regulator in the state where the person lives;
• Look for third party reviews such as online reviews, real estate agents, and past buyers who have worked with the broker. Of course, online information has to be regarded skeptically;
• Interview more than one broker to find one who is a personal fit for the person who is going to hire them; Consider whether they are responsive, what their primary contact methods are, and whether their overall demeanor what a person expects;
• Check their rates and make sure their fees are competitive;
• In an interview, a person should try to assess the broker’s experience as well as their ability to close on time, their relationship with a variety of lenders and their understanding of the market.

Do I Need an Attorney if I Have a Mortgage Broker?

A mortgage attorney can review a mortgage loan contract as well as a home purchase contract. A broker is not an attorney and cannot fully advise you of the consequences and obligations of a legal contract.

A mortgage attorney is the professional who can review loan and purchase contracts and advise a person of any potential problems lurking in the provisions of either agreement. Or, if a person believes they have been discriminated against by a broker or lending institution, they should consult a mortgage attorney.

Thus, after you have obtained the mortgage loan on the terms you want and the contract for the purchase of the property you want, consulting a mortgage attorney can answer all your questions and concerns regarding this life changing purchase.