If you’re in the market for a home mortgage, you likely know just how challenging this process can be. A mortgage is a huge financial decision, and it’s one you want to treat with care and concern. A mortgage broker can be a huge help through this process, but there are some things you have to know.
While you’ve likely heard the term ‘mortgage broker’ many times, it’s not always clear what this term means. What exactly does a mortgage broker do, and when should you see one? It’s easy to confuse a mortgage broker with a loan officer at a bank, but they have distinct roles. In this guide, we’ll explore what a mortgage broker is in greater detail, as well as when you should consider seeing one.
What Is a Mortgage Broker?
First, what exactly is a mortgage broker and what role do they have within the mortgage lending process? You can think of a mortgage broker as a middleperson between you and possible lenders. They compare different mortgage lenders on your behalf, keeping your best interests in mind. They review different interest rates, loan terms, and so on.
Because they work with many different lenders, they simplify the lending process. They can assist with gathering documents, reviewing your credit history, and helping you negotiate terms with your lender. They make sure the entire lending process runs smoothly, helping you secure the right home mortgage for your specific needs.
How does this differ from a loan officer? Though they have similar roles within the lending process, loan officers only work with a specific lender. They’re paid by this lender as an employee, so they can only work with specific types of loans under this lender. Mortgage brokers usually have access to a wider selection of loan types of loan providers.
How Do Brokers Make Money?
With the definition above in mind, how do mortgage brokers actually make money? If they’re such a big part of the process, this must come at quite the cost, right? In reality, they’re usually paid by the lender. While they might be paid by the borrower in some cases, this is uncommon.
By law, mortgage brokers are required to be upfront about how they earn money or commission. Most earn a percentage of the deal from the lender directly. This means you don’t pay any additional fees when you choose to work with a mortgage broker.
When to Work with a Broker
Now that you understand what a mortgage broker is and how they earn a commission, when should you choose to work with one yourself? There are a lot of advantages to working with a broker, but that doesn’t mean they’re a good fit for every situation. Here’s when you should consider working with a mortgage broker to secure the right home loan.
You want extra help every step of the way.
Mortgage brokers help you find the right lender, and they also help you through the lending application process. Having help throughout the application, especially when it comes to complicated documentation, can make the process run much smoother. This extra help is worth it for many, especially first-time home buyers.
You need access to multiple loan types.
If you want to have greater access to different lenders and types of loans, a mortgage broker is a great option. Brokers are often gatekeepers for specific lenders, and they can open the doors to new opportunities you might not be familiar with yourself.
You’re worried about the cost of your application.
Lastly, you should work with a broker if you’re concerned about fees associated with your application. Brokers can help waive these fees, like the origination and appraisal fees. While this isn’t guaranteed, it can save you a lot of money throughout the application process.
However, like any financial decision, make sure you understand what you’re agreeing to. Always do your own research about lenders, loan types, and how much you can afford before you reach out to a broker. While working with a broker can help you through the process, they don’t always offer better deals than you could get on your own. In addition, you could owe a broker fee that isn’t covered by the lender.
Navigating the Mortgage Process
Ultimately, mortgages can be complicated, especially if this is your first time buying a home. There is no one-size-fits-all about this process. Working with a mortgage broker can save you time, money, and stress, but that doesn’t mean it’s the best option for you. Like all financial decisions, it’s a good idea to know exactly what you’re getting into.
Last but not least, if you’re shopping for a mortgage, get expert guidance. Debt Busters is familiar with all types of loans, and our experts are here to help every step of the way. From creating a home budget to finding the right lender, contact a member of our team today on 1300 368 322.