You have decided you are ready to buy your next home, the one that will help you to live out where you want to be in the next stage of life. Before you go house shopping and fall in love with a home, it is wise to find out what kind of mortgage you could qualify for. The best way to go about the mortgage process is to shop around. One of the easiest ways to find out about all of the options available to you is to work with a mortgage broker who can walk with you through the entire mortgage process from start to finish.
You may have heard the terms mortgage broker and or mortgage lender or lending agent. Aren’t these all the same thing? Don’t they just describe the person you talk to about getting a home loan? A mortgage broker is actually different from a lender and a lending agent. Let’s go over who a mortgage broker is, how they are different, and how to find a good one.
What a Mortgage Broker Does
A mortgage broker is sort of like a buyers’ agent, but for mortgages. They communicate between you and the banks trying to sell you their mortgage product. The mortgage broker is there to work on your behalf and to shop around for the best mortgage options from several lenders to fit your personal financial needs. Great mortgage brokers will have a well-developed relationship with several lenders as well as know what others are currently offering to help make the process of applying for a loan much easier.
Mortgage brokers must be licensed and have legal regulations they must follow as financial professionals. Mortgage brokers will do much of the legwork including gathering all application and qualification documents, pulling credit scores, and verifying current income and employment status. They gather all of the information and put it into their system then apply for several loans all at once on your behalf. They do the shopping around so you don’t have to go through it several times with several different lending agents.
After you talk over you options with your broker and decide on the loan offer you want to go with the broker will continue to work for you by collaborating with the lender’s underwriting department, the closing agent, and your real estate professional to keep finalizing your home purchase as smooth as possible.
How Mortgage Brokers are Different From Loan Officers
A loan officer, sometimes referred to as a lending agent, are employees of just one lender or bank. They get paid a salary plus commission dependent on closing loans for their bank. Their incentive is to make the bank money through accruing interest on new loans opened.
A mortgage broker will work independently or under a brokerage firm and deals with several different lenders or banks. They earn a large sum of their income from lender-paid fees.
How Mortgage Brokers Make Money
In a majority of cases, the mortgage broker receives a percentage payment from the lending agency. It is like a finder’s fee. They found the bank a new client and the bank is giving them a cut of the profit. Though they receive their payment from the lender they are still looking out for the borrower’s best interests first, because no matter what loan you apply for they will get paid.
Sometimes a broker will be paid through borrower-paid compensation. This is when the borrower chooses to pay the broker themselves. When looking for a broker ask them about their lender-paid compensation rate and their borrower-paid compensation rate. It is a good idea to ask a few different brokers about their rates and what services they will provide to search for the best options for you.
Finding the Right Broker
The best way to find a great broker is very similar to finding a real estate agent. Start by asking friends who they used and specific facts on why they liked their services. Do some online homework about brokers in your area. Look at online reviews, read bios, and research experience. Ask your real estate agent who they have worked with in the past and who their customers seem to give good feedback about.
Finally, check them out through the state’s licensing authority to be sure they have a current license and are in good standing with requirements.
If you are looking for a mortgage broker in California, I would love to work for you. I have many years of experience and work hard to find my clients the best possible mortgage options to get them into a home they love.