Versatile Middleman

 

Buying a new home is one important event in a person’s life. It is also a complex business when one considers the variety of choices to be made. Among the many considerations included are style, amenities, proximity to school and the general location.

Included in the complex business are the complicated aspects of the buying process. This is most true for those without past experience. This is where the services of a mortgage broker are badly needed for a would-be home buyer.

Mortgage broker duties

The mortgage broker serves as the go-between the lender and the borrower while handling the time-consuming process of securing the loan and gathering the considerable paperwork involved.

Mortgage brokers will compile all these needed paperwork that includes credit reports, bank statements, and the employment history for borrowers who wants to buy a house or refinancing an older loan.

Loan amount

The broker actually determines an appropriate loan amount, loan-to-value (LTV) ratio, and the borrower’s ideal loan type, then submits the loan to a lender for approval. The broker communicates with the borrower and the lender during the entire transaction through closing.

Once everything had been agreed upon, the mortgage funds are loaned in the name of the mortgage lender, and the mortgage broker collects his commission from the lender as compensation for his services.

The borrower may also be responsible for paying all or part of that fee in the closing statement. The broker only gets paid when the loan transaction is completed.

Time and effort

A mortgage broker can help a borrower save a huge amount of time and effort. Some borrowers tend to call several lenders individually and try to work over complicated loan offers.

A mortgage broker who works with multiple lenders can help borrowers identify the best loans and rates from a broad range of loan programs. In all these, a borrower simply works with the broker to determine how much loan the borrower is likely to qualify for.

Anticipation

A broker is expected to anticipate problems that may arise during the whole process of application. He is also expected to be able to determine which issues might create difficulties with one lender versus another.

Mortgage brokers are expected to be versatile to work with lawyers, underwriters, title companies, and even including the seller’s real estate agent.

Fees

Mortgage brokers are paid in two basic ways: through fees paid by borrowers or by way of commissions paid by lenders. The amount of fees and commissions are variable, but brokers can earn up to 2.75% of the total loan amount, depending on who is paying.

 Borrower fees are those paid by the borrower typically range from 1% to 2% of the total loan amount. They can be paid as a lump sum at closing. However, they are sometimes rolled into the total loan amount or they are otherwise incorporated into loan fees.

Commissions

Lender commissions, ranging from 0.50% to 2.75% of the total loan amount, are paid by the lender after closing. Not many people know that when lenders pay commissions to the brokers, they typically pass these costs on to borrowers by building them into the cost of the loan.

Liaison Guide to your Loan

 

Minus all the other opinions, a mortgage broker is basically a middleman who works between the borrower and the bank to help the borrower obtain his .home loan financing

For a homebuyer, the option is to enlist a mortgage broker who will act as his liaison and loan guide. Brokers can help borrowers apply for a mortgage. Along the way, they do most of the work whether it is for a home purchase loan or a mortgage refinance.

Brokers will manage your loan application from start to finish while shopping your interest rate with multiple lenders. In practice, he will act as a liaison between you and the lender bank and communicating with the bank or you separately.

The process

When the prospective borrower had contacted a mortgage broker and agreed to work with him, the broker will gather all his important financial information.

The information includes the borrower’s income tax returns and pay stubs, as well as the borrower’s assets that include savings, checking account statements employment documentation and his credit report. 

All of these are the necessary papers for the lender-bank to assess the borrower’s ability to get his home loan financing. 

Mortgage refinance

In mortgage refinance, the lender will assess the borrower’s current home equity, the appraised value of the property. He will use a mortgage payment calculator to check what loan terms the borrower might benefit from.

After all the pertinent papers with all the important details, the broker will then determine what will work best. This could include setting an appropriate loan amount, loan-to-value, and to determine which loan type would be best for the borrower.

This is the key advantage of a mortgage broker. They have the ability to compare mortgage rates with numerous banks and mortgage lenders simultaneously to find the lowest rate and/or the best loan program with the fewest costs.

Brokers and retail banks

All types of loans, from the conventional loans all the way to FHA loans, mortgage brokers can originate them depending on the lending partners they are approved to work with. They can search all the programs of their lenders to find the right fit for you and the best price.

Retail banks will provide you with generic loan choices without any further insight in terms of structuring the deal to your advantage. The loan officer can only offer loan programs and corresponding mortgage from a single bank.

Sometimes, they may even miss on a simple detail that could jeopardize your loan approval. 

Loan guides

Mortgage brokers are your de facto loan guides while being accessible and hands-on from the start. They can find a home for your loan among their many lending partners. They also provide more advanced recommendations or can structure your loan favorably to lower costs.

Apart from the paperwork and quotes, they can run your loan scenario through different mortgage calculators in order to look for the best structure of the deal.

Sometimes, they may also suggest that you limit your loan into a first and second mortgages to avoid mortgage insurance and get a better blended rate.