What Does a Mortgage Broker Do?

Are you looking to buy a home? It is an exciting time when you look to put down residential roots and make the biggest investment of your life. If you have enough money to buy your home outright, that’s great, but most people will need to take on debt in the form of a mortgage.

Mortgages can be complicated, and you must qualify for the amount you seek. Every lending institution has criteria, and shopping around and seeking the loan you want can be overwhelming. Fortunately, there is a better alternative, and that is working with a mortgage broker.

Let’s learn what a mortgage broker does. Use this as a guide to understanding the role of a mortgage broker and how you can benefit from their services. You will find that they are an important part of your real estate team and will find you the best mortgage available to you.

What does a mortgage broker do?

1. They Represent You To Lenders

These licensed professionals are the intermediary between you, the home buyer and various mortgage lenders. They typically have long-standing relationships with loan officers and regularly work with many different financial institutions.

Their focus is on presenting you as their clients to the lenders to find you the best mortgage that you can qualify for and are advocating for you so lenders take a closer look at the numbers while explaining your financial stability beyond the numbers in case there are any doubts about them funding your mortgage.

Because they are independent, they have more options for securing your financing and will work hard to get you a mortgage.

2. They Assess Your Finances

A mortgage broker must see your entire financial picture to best serve you. This includes:

  • Credit history
  • Income
  • Savings
  • Debts
  • Loans
  • Investments
  • Other assets

They use this information to calculate the amount you can afford based on different lending criteria from various lenders. The current lending environment can affect how much you qualify for and the housing prices in your desired area.

Understanding where you financially sit can influence what you can purchase, so it is advisable to get this assessment done before you are set on a certain house or neighbourhood.

3. They Compare Mortgage Products

A mortgage broker has many choices and shops around for the best financing based on your financial situation. They weigh the options of the big banks, credit unions, and alternative lenders and then fully explain them to you. You will get a detailed explanation of the various products the lenders offer, with all the associated costs of each, and your broker will then recommend you for financing your home.

Often, they can get the best mortgage rates and terms because of their relationships and know which loan officer to deal with based on their financial situation. Once you decide, they will prepare the mortgage application and help you submit it.

4. They Negotiate

Once they have found a few lenders interested in funding your mortgage, they are there to get the best deal they can for you. Sometimes, because of their strong relationships and the volume of business brought to the lending institution, they can negotiate a lower interest rate or better terms for your mortgage.

This is a great advantage for you as it will be much better than walking into a bank. A good broker knows how to take your financial picture and present it in the best light.

5. They Get Paid By The Lender

One of the great things about a broker is that while they work on your behalf to get the best mortgage terms possible, you don’t pay them for this service. They earn their income through a commission from the lending institution.

A broker will only get paid their commission once you sign a mortgage contract. Banks always work with brokers, which is an important way for them to get business. and they prefer to deal with a broker as they do much of the heavy financial lifting about obtaining financial information about a borrower and pre-qualifying them based on the lending criteria.

There are some cases where a broker may charge a one-time fee for those who are unable to pass a mortgage stress test or have a credit score that is too low. This is compensation for a broker’s extra work to obtain a more complex or higher-risk mortgage, which is only paid once approved and signed.

Some brokers also have a cancellation fee if someone backs out of a mortgage after they have been approved.

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