In case you are considering purchasing a home soon, you will probably obtain a mortgage. Here, you have two choices, working with banks and other lenders directly or go through mortgage brokers and let them go through this hustle for you. These days, mortgage brokers are not as rare as they once were. They are still a small section of the mortgage market, however. Below are tips you should grasp on whether or not, you need one.
What is a mortgage broker?
A mortgage broker is an intermediary between a homebuyer and a mortgage lender. With detailed information on the buyer’s finances, the mortgage broker will find the right mortgage products, apply for pre-approvals, collect the required documentation, fill in the application and aid the clients on which mortgage product they need to go for.
Mortgage brokers get their earnings from origination and or intermediary charges. These are paid when the loan is processed. This fee usually lies between 1 -2 % of the loan. Initially, mortgage brokers took a large percentage of the market, approximately 68%. This was until the occurrence of the subprime mortgage crisis. This crush made most of the lenders quit the wholesale mortgage market. This largely reduced the supply of loans that brokers got. Right now, around just 10% of mortgages run with the help of mortgage brokers.
Most individuals automatically don’t want to go for a mortgage broker to help with finding the right home. In the end, you will have paid a real estate agent, a home inspector, and others. Besides, you can personally do all that the mortgage broker would have done.
What is the need of hiring a mortgage broker? Below are the pros of involving a mortgage intermediary in the search for the perfect home.
For rate shopping: This is undoubtedly the greatest importance of a mortgage broker. Most people buying mortgages will buy the first mortgage quote given to them by the bank. They do this although they can apply for all the mortgage quotes they want. A slight difference in the rates of two mortgages can cause you to save lots and lots of interests throughout the life of a mortgage. Without a doubt, you need to look around for the right mortgage.
The challenge with shopping for the right mortgage is that they can take forever. Anyone who has been through this process can attest to that. It may take the whole of your afternoon to apply for just five different mortgage pre-approvals. A mortgage broker can help with this.
Very accessible: unlike most bank loan officers, mortgage brokers work for you just like real estate agents. You don’t pay them until the loan is originated. Therefore mortgage brokers are easy to get to, unlike bank employees. You will easily find answers to any questions from the broker faster.
Some lenders deal with brokers alone: As said earlier, some banks no longer deal with brokers. However, you should note that there are mortgage lenders that work exclusively with brokers. For this reason, your broker might be able to access loans that you can’t.
They can convince lenders to lower some fees: They can convince the mortgage lenders to lower fees: application, appraisal and origination fees.
Despite the reasons to hire a mortgage broker, you should note the following shortcomings.
Loan access of brokers is lesser than it used to be; as mentioned initially, following the subprime meltdown; most lenders quit the mortgage market. Industry heavyweights including Wells Fargo, Bank of America and JP Morgan Chase have quit the mortgage market. The choices of lenders the brokers have is limited.
You can do it: all the mortgage broker does that you cannot do for yourself is run deals with lenders who deal with brokers exclusively. Acquire your quotes and fill out your own mortgage applications. This is time-consuming. However, if you have time at your disposal, you can do this on your own easily.
Conflict of interests could arise: These brokers are paid a fee by the lenders. This fee may be different for different lenders. The reason as to why only a few mortgages are left is because most mortgage brokers were getting unaffordable mortgages to clients and charging at a high rate. Credits go to The Odd for the reduced rates of conflict. You need to be aware of the possibility of this conflict.
You can get yourself a better deal: Considering that there are some lenders that a broker cannot reach, it is possible to land yourself a better mortgage deal alone.
Despite the good reasons, you shouldn’t just hire a mortgage broker and wait. As mentioned earlier, the FICO scoring rules let you apply for all the mortgages you want but within a limited duration of time. You need to look around for the right broker for you, by taking referrals from friends and checking reviews.
Check out all the mortgage options at your disposal before settling for one. In the end, the admissible rate differences turn out to be thousands in savings over a 30-year old mortgage loan life.
If you’re considering getting a mortgage in Vancouver, please contact our buddies at http://bc.communitylendingcentre.com/. They’ll sort you out!:
Community Lending Centre Vancouver
500 – 2608 Granville Street
Vancouver, BC V6H 3V3