If you are looking to buy or lease a property, then you might have already heard of a home loan broker. However, if you are acquiring property for the very first time, you may need to know more about home loan brokers and the role they play in you getting your new property.
Home loan brokers also known as mortgage brokers are intermediaries who bring lenders and borrowers together. You may be wondering why wouldn't a borrower just go to a bank? Well, it is a known fact that people do not always get the loans they apply for due to their credit rating or lack of collateral. So, simply put, a mortgage broker connects lenders to borrowers based on the latter's financial capabilities and interest needs.
Apart from this, a mortgage broker also takes care of the paperwork that needs to be underwritten and then passed along to the lender from the borrower. It is however important that a mortgage broker should not be confused with a mortgage banker which usually funds mortgages using its own funds. You can find more information about home loan brokers by visiting this website however simply put, mortgage brokers are usually intermediaries and do not fund mortgages directly.
So, now that you understand who a mortgage broker is, the question is just how does having one help you?
Since the mortgage or loan broker works as an intermediary, he comes in (regardless of whether the potential borrower is buying a new home or refinancing) having gathered loan options from various lenders. These are the options the potential borrower that will consider while qualifying for the mortgage.
Apart from this, the broker also gathers documentation that shows income, asset ownership, employment records, the required credit report and any other relevant documentation relevant information that may be vital in accessing the borrower some secure financing.
The mortgage funds are usually issued in the name of the lender and the broker gets a commission for the service rendered. This fee is only paid once the loan transaction has been completed. Some loan brokers may offer what they like to call 'no interest loans' which is not as it sounds. In essence, this is when the borrower pays no fee to work with the broker. However, the lender does pay the broker at closing and this fee is calculated into the loan's interest rate. What this means is that the borrower pays more over the life of the mortgage than they would have if they simply paid the commission.
It is important to note that as a potential borrower, you should probably do your research and get referrals from as many real estate agents, friends and family so that you can be assured that you get a mortgage broker who has the right credential's for the borrower's level of experience. If you are refinancing your home loan then the same rules apply, do your research and understand any agreements you sign, if refinancing a mortgage is currently an option for you, then you can learn more here.
Finally, it is important to note that a lot of times, mortgage brokers are confused with loan officers. The thing you need to remember when dealing with a mortgage broker is that they are paid per transaction which means that they stand to earn more with every loan processed and that they get more with larger loans. Loan officers on the other hand work on a salary which means that they are not always as motivated by volume or size of a loan.