Updated: Nov 5, 2019
When looking for a mortgage you have a few options to find the best loan. You can shop around yourself, use a mortgage broker, or a bank loan officer.
What is a Mortgage broker?
A mortgage broker is an independent licensed professional who will help you through each step of the financing process, from pre-approval to closing the loan. They will shop multiple lending institutions to find you the best type of mortgage with the best rate for your situation. Brokers work with several lenders so you can potentially find better deals than if you worked directly with the loan officer at a specific bank. Plus, a mortgage broker can help you find alternatives when you have a tough financial situation. If the deal doesn’t work in one place, chances are a mortgage broker can find an alternative.
A mortgage broker acts as a liaison between you and all the other professionals involved in the home buying process, this includes escrow officers, title companies, and others.
Because a mortgage broker works for you they do not get paid unless you close the deal therefore they will ensure all time sensitive milestones are met for your closing.
How do mortgage brokers get paid?
According to the National Association of Realtors (NAR), mortgage brokers charge a fee. That fee can be paid by you, as part of your loan’s cost, or it can be paid by the lender. NAR says that a typical broker fee is between one percent and two percent of the loan amount.
Other fees charged by the broker must be disclosed and itemized. The mortgage broker should be able to tell you exactly what each fee is for.
Whether you choose a loan officer at a bank, use the internet to look for a loan, or work with a mortgage broker, there are fees involved with a home purchase. You likely won’t pay higher fees with a mortgage broker than by going directly to the lender. In some cases, a broker can even get a lender to waive some of its fees.
When to use a bank instead of a mortgage broker
While a mortgage broker can be a great resource when you’re buying a home, there are times a bank can be better. If you have a relationship with a bank then working with the banks loan officer may be right for you. Sometimes banks and credit unions have specific programs they offer to customers. This is especially true if you qualify for client services. A bank’s private client services may be able to offer better terms. Banks offer client services to customers that have at least $500,000 in liquid assets. But that’s not the only way to get the best from a bank. If you have a long-standing relationship with the bank or credit union, you might get access to better terms and better service on a home loan.
How to vet a mortgage broker
While loan officers only have to register with the state, mortgage brokers have to be licensed. In order to be a licensed mortgage broker, a broker must take a national test and meet state requirements. To evaluate a potential broker you are considering working with you can start with the National Mortgage Licensing System. There you can see the status of a broker’s license, their history, and see if any negative actions have been taken against them.
It is also recommended that you use a broker that belongs to the National Association of Mortgage Brokers. Association members are held to a higher ethical standard, and the associations focus is on advocating for consumers in these professional organizations.
Before you make a decision, do a little shopping around. See what the mortgage broker offers, and compare that to what you find online and from your own financial institution. Shopping around can only benefit you, and you can be sure you’re getting the best offer for your situation.
If you need a recommendation for a Mortgage Broker, I am happy to provide the names of several I have used and trust.
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