How to find mortgage broker options that fit your budget

Should You Work With a Mortgage Broker?

A mortgage broker acts as a middleman between you and mortgage lenders. They do the hard work of shopping around to find you a mortgage that suits your specific financial situation. They don’t actually lend you money, but connect you with those who do including portfolio lenders and correspondent lenders.

Working with a mortgage broker can have its benefits. They have access to multiple lenders, potentially securing better mortgage rates and loan terms than you could find on your own. It’s also helpful if you're a first-time homebuyer because a mortgage broker can help with the paperwork, explain confusing industry jargon, and suggest financing options that best fit your circumstances.

Some homebuyers find comfort in a professional looking out for their best interests during the mortgage application process. They can also provide you with a loan estimate from several different lenders. Mortgage brokers may be able to suggest products that some banks may not have.

When a Mortgage Broker Makes Sense

A mortgage broker may make the most sense in situations where your finances might raise questions from conventional lenders and direct lenders. Maybe you are self-employed or you have a lower credit score, affecting the credit score requirements that some lenders have.

This is where the expertise of a mortgage broker shines as they may be able to suggest options for specific circumstances.

Do Mortgage Brokers Charge a Fee?

Mortgage brokers are compensated for their service. Usually, this is by a commission paid by the lender but can also be paid by the borrower. It's best to discuss these details before entering a broker relationship so you understand where their loyalty lies.

Mortgage broker fees are typically 1 per cent to 2 per cent of the loan amount. But sometimes it can reach 3 per cent of the loan. This is something you will want to discuss upfront with your broker.

Finding the Right Broker for You

Ready to find a mortgage broker? Word of mouth can be very valuable. Asking friends, family, or coworkers who they've used in the past could quickly connect you with a mortgage broker in your local area. Your real estate agent also can have good connections and suggest mortgage broker options. However, don't just take their word for it, make sure you do your due diligence when interviewing.

When looking for a mortgage broker, it's a good idea to check out any local mortgage brokers in your area first. Make sure you feel comfortable with the loan origination process that they use, as each company may operate a bit differently.

Questions To Ask Your Potential Mortgage Broker

Preparing a list of questions ahead of time could make your decision much easier when comparing options. Here’s a list to get you started:

• Do you have a good working relationship with a wide selection of lenders?
• Do you have experience working with borrowers who have circumstances like mine? 
• Are you licensed to operate in my state? 
• Will my credit history present challenges? 
• Can you walk me through the timeline and various steps for getting a mortgage? 
• Do you have customer testimonials? 

Research Credentials and Client Reviews

A quick web search of mortgage brokers in your area could provide a few names to start with. Check local business reviews on Yelp or Google Reviews. Pay close attention to their history, qualifications, and feedback left by previous clients. You can find additional details on the Nationwide Mortgage Licensing System and Registry (NMLS) which offers a free lookup to see if a specific mortgage broker is licensed in your state.

Pay attention to online reviews that might indicate common problems such as responsiveness, miscommunication, or other potential issues. You can learn if they are considered to be one of the best mortgage brokers by reading reviews.

Comparing Mortgage Options

As part of your initial fact-finding with your prospective broker, they should explain common mortgage types like FHA loans and conventional loans. If they specialise in specific types, that could help steer you towards a particular one. You will want to check with other mortgage brokers to understand other products as they may have different partnerships with various lenders. The good news is this research shouldn’t cost you anything.

Before you start comparing loan estimates, you will want to get pre-approved for a mortgage. Make sure that you understand what the current mortgage rates are so you have an idea of what you may qualify for.

There’s even more to understand before taking the mortgage plunge. The total cost of owning a home includes property taxes, HOA fees, mortgage insurance, homeowners insurance, etc. Depending on the loan type, closing costs, appraisal fees, discount points, and other potential charges all can add up fast. It’s best to familiarise yourself with these and compare to determine what you are comfortable with.

Preparing Financially

As mentioned earlier, bad credit isn't a deal-breaker but knowing what to expect before finding a mortgage broker could be very helpful. Review your credit reports for any potential issues before shopping for a loan. Depending on your lender, your score could affect interest rates or other fees associated with obtaining a loan. Even before your first meeting with a mortgage broker, review tips for getting the best loan to get a better understanding of where to focus your questions.

Additional Information

Here are some further items to review before you start meeting with a mortgage broker. It is important to go into your first meeting prepared so you know what questions to ask.

• Understand Closing Costs - Before working with a lender, clarify any potential closing fees. Check with other mortgage brokers to see if they may have lower associated fees.
• Getting Pre-Approved for a Loan - You may save time if you go through the pre-approval process first, that way a mortgage broker won't suggest options you would not qualify for.
• Compare Loan Options - Don’t be afraid to interview several mortgage brokers before signing on the dotted line. Some lenders may not work with mortgage brokers, so compare rates directly with lenders too.

Buying a home is stressful. And securing the right mortgage can be complex, even with all the helpful information available online. Sometimes having an extra set of eyes reviewing your finances is worth the price, especially if it can lower your interest rate or get you approved. Finding a mortgage broker may provide some benefits but do your homework to avoid getting taken for a ride.

(This article is part of IndiaDotCom Pvt Ltd’s Consumer Connect Initiative, a paid publication programme. IDPL claims no editorial involvement and assumes no responsibility, liability or claims for any errors or omissions in the content of the article. The IDPL Editorial team is not responsible for this content.)