When it comes to getting a mortgage loan, there are many choices, from local banks and savings and loans to credit unions and internet banks. One of the most valuable ways for many people to get the best mortgage rate, however, is through a mortgage broker.
A mortgage broker acts as an independent contractor and serves as a middleman between the borrower and the lender. A good mortgage broker can check a wide universe of available mortgage loans, from a wide variety of lenders, to find the mortgage that best suits the needs of the borrower. For this service, the mortgage broker is paid a fee, typically a commission based on the amount that is borrowed.
There are many reasons to use mortgage broker, but perhaps the most important is to save time and energy when finding the right mortgage. Using a mortgage broker frees the borrower from the need to obtain information on interest rates, closing costs, lenders, etc.
In addition, some people turn to mortgage brokers because they have a spotty credit history, which can make it more challenging to obtain a mortgage. Often a mortgage broker will be able to find a lender who is able to offer more favorable terms for those with bad credit.
Mortgage brokers can also sometimes provide greater flexibility in the amount to be borrowed than local banks are able to garner. Mortgage brokers are often able to negotiate mortgage loans with lower down payments than can be obtained from local banks.
When it comes to finding the right mortgage broker, there are a number of things to consider, including:
- Be sure to shop around. Be sure to talk to several different mortgage brokers, and carefully compare the fees and what they have to offer. Also be sure to ask the mortgage brokers for references.
- It is important to understand the fees charged by the mortgage broker, and to get those fees up front and in writing. In most cases, the mortgage broker will obtain a wholesale price from a mortgage lender, and the broker is then free to set the retail price of the loan. The broker’s fee will be the difference between the wholesale and the retail cost of the loan. It is important to shop around, and to compare offers from various mortgage brokers, to avoid paying excessive fees.
- Be sure to read the agreement carefully. It is important to verify that any promises made by the mortgage broker are spelled out in writing in the agreement you receive. If anything is missing, be sure to ask the mortgage broker to revise the agreement to include what was promised.
- Always be honest in your loan application. Never ask a mortgage broker to misrepresent your financial situation, and never allow the mortgage broker to do so.
- Never borrow more than you need. Since the mortgage broker will make a bigger commission on a bigger loan, he or she may urge you to borrow more than you need. Do not fall prey to this temptation.