The process of applying for a mortgage is stressful, whether it be to buy a new home or refinance your loan. Many people do not know where to start, especially if their financial situation is not an enviable one. Going directly to a lender is nerve-wracking and presenting yourself to a mortgage loan officer can be worse than taking an exam.
There enters a mortgage broker to help you overcome all these difficulties and find the right lender for your mortgage needs. However, mortgage brokers are not knights in shining armor coming to save you, they have their agenda and their own business to take care of. You will get the best deal if your needs align with their agenda.
That is why we created this easy-to-read article where we laid out the key factors you what to consider, so you do not get scammed by your mortgage broker.
A mortgage broker is a link between a borrower and a lender. They are a professional mediator that helps you find the best lender and negotiate the best possible terms for your loan. Ideally, they are a paid advisor that presents your case to the lender with your best interest in mind.
It is only natural to find the best possible broker, the one who can do a better job than you could do yourself. If you are from Florida, you should try and find the best mortgage broker Florida has to offer, not only the closest one.
Mortgage brokers can be referred to as your agents, they do not give you the loan themselves, but rather work with you to find optimal lender options. Essentially, when you hire a mortgage broker, you expect someone who will take a look into your finances, create a presentable case for you, help you get preapproved, and find the best lender in his or her broker-lender network.
A good mortgage broker will have a wide net of lenders, to assure the most favorable connections for their clients. It could be a red flag if there seems to be just a handful of lenders working with your broker. In that case, they might not have your best interest in mind, but rather that of a lender they work closely with. Ask your broker why he or she chose to work with those specific lenders.
After establishing that your potential broker has a network of lenders wide enough, it is important to know how the mortgage broker gets paid. There should not be any unannounced fees, and they should be upfront about how they collect their paycheck.
In the US and many other countries, a mortgage broker can be paid either by the lender or the borrower, never should the money come from both sources. Knowing how a potential broker collects their fee can protect you from scams and frauds.
Note that either way the money comes out of your pocket in the end - the main difference is when. If your mortgage broker collects fees directly from the borrower, you would have to pay 1%-2% of your loan upon closing the deal. In that case, for example, you would pay $2000 for a $200.000 loan.
Mortgage brokers who get paid by the lender do not collect their fees directly from you. The lender will include that fee in your monthly mortgage payment bill. In some cases, there could be fees that you would have to pay to a broker upon closing, but this method is frowned upon.
A mortgage broker in the United States can be any person who passed a specialized test called SAFE Mortgage Loan Originator Test. They are not obligated to own a college degree and there is no requirement to be educated in economy and finances.
That being said, you should look for someone who is educated in the field of economy, finance, real estate market, etc. Just because someone is educated does not mean that they are the best, but it can be an indicator of their familiarity with issues on the market.
Nevertheless, the best qualification always comes from years of experience and numerous satisfied clients. Check the online reviews and talk to the people who had already worked with them. One bad review might be a revolted client and does not mean that the broker does a bad job. But having an insight into what other people went through with that particular broker can help you avoid fraud.
Whether or not you need a mortgage broker depends mostly on your financial situation and your ability to get through the process independently. Shopping for a mortgage means having to reevaluate your budgeting, credit score, debt-to-income ratio, and other important factors that lenders might request.
If you are not in a bright place financially, if you have problems with your credit score being too low, you probably need a broker to help you prepare your case and recommend the next steps. They might also work with a lender that would work with people with imperfect credit or DTI ratios.
People usually hire mortgage brokers when they have no time to fill out forms and search through the endless list of lenders. Hiring a broker can save you time and get you to your mortgage loan much faster.
You probably do not need a broker if your financial record is squeaky clean if you have the time and you know how to fill out an application form. In that case, it is probably a piece of cake to find a lender on your own and get the best conditions for your loan.
If you have a bad experience with your mortgage broker, online reviews would not cut it. If you think you are owed money or have been manipulated by that broker, you can file a complaint against them with the Consumer Financial Protection Bureau.
You can send a complaint to CFPB even if you think you have been mistreated or neglected by your mortgage broker. Numbers show that 98% of all complaints have been responded to, so if your broker does not want to communicate with you about your issues, sending out a complaint might be a good way to resolve the problem.
Remember that broker’s main role is to find the best possible solution - a mortgage that you can afford and that will not be a burden for your home budget in the future. If this turns out to be a lie, and the mortgage does not fit you - you can yet again fail a complaint against your broker.
It is always better to resolve the situation with an open discussion. That is why having a reliable mortgage broker means having an adviser you can trust and whose agenda aligns with your needs.
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