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Mortgage Brokers: An Overview
A mortgage broker acts as an intermediary between someone who wants to buy real estate and those who offer loans to do so. Mortgage brokers help potential borrowers find a lender with the best terms and rates to meet their financial needs.
In the wake of the real estate crash in 2008, the business practices of brokers came under scrutiny and the question of whether they act in the best interests of clients was raised.
Working with an experienced and knowledgeable mortgage broker can help you find the right mortgage. There are still advantages and disadvantages to using a mortgage broker. You should weigh them carefully before committing.
Key points to remember
- Working with a mortgage broker can potentially save you time, effort and money.
- A mortgage broker may have better access to lenders than you.
- However, a broker’s interests may not be aligned with yours.
- You can get a better deal on a loan by dealing directly with lenders.
- When you meet potential mortgage brokers, ask them to detail how they will help you, all of their fees, the lenders they work with, and their experience in the field.
Mortgage Broker vs Lender vs Loan Officer
A mortgage broker acts as an intermediary between a financial institution that offers loans secured by real estate and individuals who want to buy real estate and need a loan to do so.
The mortgage broker works with the borrower and the lender to get the borrower’s approval for the loan. They also collect and verify all the necessary documents that the lender needs from the borrower in order to finalize the home purchase.
A mortgage broker typically works with many different lenders and can offer a variety of loan options to the borrower.
A borrower does not have to work with a mortgage broker. They can work directly with a lender if they wish.
A lender is a financial institution (or an individual) who can provide the funds needed for the real estate transaction. In return, the borrower pays back the funds plus an agreed amount of interest over a specific period of time.
A lender can be a bank, credit union or other financial company. Potential buyers can approach any lender directly for a loan.
Although a mortgage broker is not required to facilitate the transaction, some lenders can only work through mortgage brokers. So if your preferred lender is one of those, you will need to hire a mortgage broker.
A loan officer works for a lender. This is the person you will deal with if you approach a lender for a loan. The loan officer can help a borrower understand and choose among the loans offered by the lender.
They will answer all questions, help a borrower pre-qualify for a loan, and participate in the application process. They can be your advocate while you work to close the loan.
Mortgage brokers do not fund loans or approve loan applications. They help people looking for a home loan find a lender who can finance the purchase of their home.
How to choose a mortgage broker
- Start by making sure you understand what a mortgage broker does.
- Then ask friends, relatives and business associates to recommend you.
- Take a look at online reviews and check for complaints.
- When you meet with potential brokers, get a sense of their interest in helping you get the loan you need.
- Ask about their experience, the specific help they will provide, the fees they charge and how they are paid (by the lender or the borrower).
- Also ask if they can help you in particular, given your particular financial situation.
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