How do you know when you are ready to buy a house? Is it when…
Mortgages are one of those things you only start reading up on once you find that you need them. After all, it’s not an application you have to make plenty of times in your life. Some people ultimately do not even get a mortgage to fund their home purchase. The home loan process can be quite complicated, depending on your unique financial situation. Oftentimes, you might find yourself in need of assistance.
If you have arrived here for this exact reason, it’s time to take a deep breath! This is a safe place where we hope to provide you with the tools necessary to help you choose from your available options. Take comfort in the knowledge that several people have been in your shoes before. Mortgages are complex, especially if you are just about to become a first-time homebuyer. You’ll be glad to know that there are qualified professionals that can offer their help.
In this article, we’re going to share with you a few reasons why you might want to avail yourself of the services of an independent mortgage broker. Think of them as another kind of financial advisor but with a special focus on home loans.
What is an independent mortgage broker?
When it comes to relationships built around money transactions, the foundation is always in the pooled trust. When you get a mortgage broker to service your home loan, this will be exactly the case.
2008 Subprime Mortgage Crisis
In the wake of the 2008 Financial Crisis, a lot of blame was focused on brokers, especially those specializing in subprime loans. The spotlight was trained on the general practices of this industry that created a domino effect that terribly hurt the global economy. Because several mortgage brokers pushed the sale of mortgages on people who ultimately could not afford them, the housing market bubble burst by 2008, leaving even powerful firms like Bear Stearns with no other option but to close.
Today, both brokers and borrowers are still feeling the effects of this decade-old disaster that pushed people out of their homes and into the street.
Duties of Mortgage Brokers
As a financial advisor might point you in the direction of the best investment basket for your money, a mortgage broker is supposed to lead you to make the best mortgage decision for your dream home. The relationship is built on trust, with the assumption that your mortgage broker will do right by you.
Unfortunately, this is not always the case.
Mortgage brokers are usually intermediaries between the mortgage borrower and the lender. Their job is to assess your situation and, with their resources, bring you to the best lender who can give you the interest rate you need. However, in the absence of wholesale observation, one can never really know for sure if the mortgage broker you will be dealing with has frequent business partners, i.e., those from whom the broker can get a stabler commission rate than others. And this is where trust comes into play.
To begin with, mortgage brokers are already expected to work freelance. But these days, it has become important for many to distinguish between those who call themselves independent mortgage brokers and those who work for a specific company. Whatever the case, you have to go with your gut.
Are mortgage advisors free?
Mortgage brokers, even those who work independently, are paid via commission. This commission can be billed either to the borrower, the lender, or at the closing of the mortgage. The fee is typically 1% to 3% of your loan amount, so it’s something you might want to get clear from your mortgage broker from the get-go.
A mortgage broker is supposed to find the best mortgage deal for their client as much as possible. This includes the interest rate, loan type, and other terms. And the fees for their services will depend on the conditions of the mortgages that will be granted to the borrowers.
Aside from general commission, you might also want to discuss other fees with your mortgage broker. You can also be charged originator fees and other administrative expenses. A good mortgage broker is someone who practices transparency with their clients and will explain all these necessary charges from day one.
Advantages of Hiring a Broker
At this time, you might be wondering, if I can’t be sure that my mortgage broker will work in my best interest, why should I hire one in the first place?
There are still many benefits to using a mortgage broker, and chances are, you might know someone in your circle whom you can trust to find the best deal for you. It will still be up to you to assess your own situation and compute the costs of skipping expert advice. Many people can process their own mortgages, and there are even available online tools that can help you with the whole procedure. However, there might still be a chance that you won’t be able to do the right amount of research that will end up saving you a lot of money.
Here are a few reasons why you should consider using a mortgage broker.
1 – Access
When you think about it, it can be possible for anyone to plan their whole wedding from flowers to catering. You’ll be able to save on the fees that wedding planners charge, but then again, you might not be saving that much money when all is said and done.
When you hire a mortgage broker, what you gain is access to important knowledge in the industry and access to their existing relationship with partners, who might be able to offer exclusive deals and rates you wouldn’t be able to get otherwise.
2 – Legwork
Mortgage applications are a serious business that entails a lot of paperwork. If you ask anyone who has ever benefited from the services of a mortgage broker, they might tell you that what they really saved is time, not money. Even research has its cost in hours, and not everyone can find the availability to absorb all of the important information.
Shopping for the best mortgage will mean talking to different lenders. And if you can afford to avoid this tedious part of the process, you can do with a trustworthy mortgage broker.
3 – Protection
Lenders make money through the fees applied to your home loan. The more fees you pay, the more they earn.
Sometimes, it is also necessary to hire a mortgage broker so that you are protected from those unknowable phrases in the fine print. In the same way that you wouldn’t want to sign a contract without your lawyer’s advice, it’s better to have someone on your side before you cross the t’s and dot the i’s. With a mortgage broker, you can steer clear of predatory lending practices.
Should I use an independent mortgage broker?
Through this article, we hope we could paint you a better picture of the mortgage experience you can have with a mortgage broker at your side. There are pros and cons to hiring brokers, but even the wisest will need advice sometimes. Only when you are aware of all the available options will you choose the best offer the market can give.
If you’re still unsure if you should get this kind of service, here are a few questions you can ask yourself:
- How much do I know about mortgages and lending practices?
- How much time can I set aside for my mortgage application?
- Am I willing to talk to lenders and banks directly?
- Is there an independent mortgage broker I can trust?
The mortgage business can be very intimidating, but never forget that it is okay to ask, especially if you truly need help. There are no right or wrong questions for someone who is just doing their best to learn!
Are you ready to purchase your dream home?