If you've been finding it hard to choose a mortgage, you're not alone. Home loans…
When you want to borrow money to fund the purchase of your dream home, there are several loan options you might be eligible for, depending on your credit score, your profession, or even where you are planning to buy real estate. But when it comes to how you can find the ideal home loan for you, you can only either find it out for yourself through research, a lot of meetings, and several inquiries, or you can ask the help of a professional mortgage broker who will be able to take all the stress away and do most of the legwork for you.
Between the two, it doesn’t take rocket science to realize which is more convenient.
What is an independent mortgage broker?
The ideal mortgage is definitely going to be different for everyone. After all, not all two houses are the same, and this goes for people as well. There will be borrowers who would want to pay for their home loan over a period of thirty years, and there will yet be others who would prefer to finish making payments after just a decade. But what everyone will agree on is that the cheaper the overall rates you pay for, the better. However, finding this perfect mortgage will take a lot of grit and industry know-how, and if you’re banging out of luck when it comes to available time, the smaller your chances of getting closer to the best option.
This is why there is such a thing as mortgage brokers. If insurance has financial advisors, home loans have mortgage brokers. They’re different from bank loan officers who can only offer their employer’s limited products and services. On the other hand, mortgage brokers are professionals who can look for the home loan that would be the best fit for you, according to your financial profile. Most of them are expected to work independently. Still, since the 2008 Subprime Mortgage Crisis, more people have come to prefer the aid of those who clearly identify as independent mortgage brokers than those who do not. Let’s talk briefly about why.
2008 Financial Crisis
Many causes were leading to the disaster that was the Global Financial Crisis that began sometime in 2007. One of them was the growth of subprime mortgage lending. Over the years, much of the blame for this was focused on mortgage brokers who knowingly sold home loans to borrowers who, in reality, could not afford them.
It is important to remember that the more loans mortgage brokers can sell, the more they earn. The higher the loan amount, whether or not the client can really afford it, the higher their commission. This is the caveat to hiring a mortgage broker, which is why as much as possible, you must ensure that you can hire someone who doesn’t just work independently. This mortgage broker must also be someone you can absolutely trust.
Can mortgage brokers work independently?
Simply put, an independent mortgage broker is someone who any specific mortgage brokering firm does not employ. They are free to find partners and take the business of clients to whichever lender can offer the most competitive option.
Licensing to become a mortgage broker will depend on individual state laws but at the very minimum, you must be a high school graduate at least with basic computer and accounting skills. Once a license is attained, you’ll also be recommended to take continuing courses annually as your state requires.
Is it better to get a mortgage from a loan officer or a broker?
If you’re still wondering what difference it makes to approach your preferred bank’s loan officer or look for a mortgage broker to secure your home loan, think of it this way. You need to get a mortgage anyway, so instead of limiting yourself to the few home loan options offered by one bank, why not make your world bigger by availing of the services of a mortgage broker?
When you go to the bank, it will be a simple negotiation wherein the answer will be yes or no. Well, maybe not so simple because you’ll have to present several documents, prove your credit and financial capability, and assess your options. And yes, you’ll have to do it all by yourself.
Meanwhile, when you get the help of a mortgage broker, you can surrender the information that’s needed and wait for the call to find out when your home loan is approved. Instead of spending your time signing paperwork and running to and from the bank, you can instead use your available resources for planning for your move, thinking about home improvement, and other more exciting details of your life. After all, you won’t just be paying the mortgage broker to find you the loan that can give you some savings, and you’ll also be paying for the opportunity to save time.
If you’re not convinced, in 2015, the Consumer Financial Protection Bureau ran a survey and found out that 47% of mortgage borrowers actually ended up choosing the mortgage offered by the first lender they spoke with. Forty-seven percent of people did not bother to shop around.
Sometimes, once you understand how tedious a task is, the less you’ll want to do it all over again. In this case, once people got an idea of the mortgage that would be offered to them, they ended up signing up without further thought so that they can faster end the process. And if these borrowers only talked to the one loan officer, they really couldn’t have been able to find out what other options there are on the market.
Don’t be one of these people.
Should I hire a mortgage broker?
For several reasons, shopping for mortgages can be very stressful and even boring! You’ll have to analyze several rates just so that you can compare this offer and that offer—all for the hope that you’ll get the best housing loan you can afford to pay.
Suppose you have the time and resources to do all the legwork, good for you! Unfortunately, for thousands of people out there, this is not the case. Access to this kind of professional service is sometimes the only way you can hope to find the best match.
Sometimes, real estate agents will be able to point you in the direction of their brokering partners. But if you’re still not sure if it’ll be worth your money, here are a few questions you can ask yourself to guide you in your decision-making:
- How much do I know about the loan market and mortgages?
- Do I have enough free time to learn more about rates and the application process?
- Am I willing to take on the job of seeing my mortgage application through to approval?
- Can I find an independent mortgage broker I can trust?
- Will the compensation paid to my mortgage broker be less than the savings from my home loan?
At the end of the day, your mortgage, your rules. You will still have the final say about getting a mortgage from a loan officer or a mortgage broker.
Choose wisely, and don’t forget to enjoy the ride! We will you all the best of luck!