If you are home shopping, soon you will be shopping for mortgages too. Mortgage brokers are a great resource for finding the best mortgage for your needs – but like many paid financial services, you can do the job yourself.
If you've been wondering whether working with a mortgage broker makes sense for your needs, read on. We've put together this list of everything you need to know about working with mortgage brokers, plus some helpful tips on how to find the best mortgage rates with or without a mortgage broker.
What Mortgage Brokers Do
In short, mortgage brokers can help alleviate your mortgage shopping stress by doing most of the research for you. Albion Forest Mortgage Advisor Mark Robinson says, “A broker will find the best mortgage that suits your needs. This doesn't necessarily mean the cheapest as you may not meet those mortgage criteria, ”says Robinson.
"You will generally hold your hand throughout the buying process – from working with lawyers, real estate agents, to completing your purchase," he added.
As you can possibly imagine, one of the greatest benefits of working with a mortgage broker is the time that you save. While you can easily shop online yourself, it still takes a little research (not to mention repeatedly sharing all of your financial details) to find out which mortgage lenders offer you the best rates. With this in mind, mortgage brokers can be a time-saving middleman. You just give them your information once and they'll go out and find the best possible mortgage for your needs. Mortgage professionals can also be a huge advantage when it comes to explaining financial terminology, using their network of lenders to find competitive mortgage products, and even getting you a quick pre-approval letter to get you a more competitive quote on a home .
One thing to keep in mind when working with a mortgage broker is that you don't have to work with the loan they find for you. In fact, some people enjoy working with a broker and doing their own research to make sure the broker has found the best loan packages. And if you are not satisfied with what the broker finds, you can of course always cancel yourself and buy mortgage interest online.
However, make sure you understand a mortgage broker's fees before you seek their help. While most mortgage brokers receive a commission from the lender (usually a small percentage of your loan), some may charge additional fees to buyers – and you want to know that beforehand.
Who Needs a Mortgage Broker?
While mortgage brokers are by no means required, there are certain types of buyers who benefit from their services more than others. Here are some buyers who might consider working with a mortgage broker.
First time buyer
Being a first-time buyer is overwhelming enough without the added pressure of finding the best possible mortgage rate. "You should consider working with a mortgage broker if you don't know where to find good, credible lenders," said Carol Tompkins, personal finance expert at AccountsPortal.
If you are a first-time buyer with no experience purchasing mortgages, you can enjoy having a mortgage broker to point you in the right direction.
Another buyer who benefits from the help of a mortgage broker is the one who juggles too many things at once. "You might also consider working with a mortgage broker if you don't have the time or resources to do extensive research on the best lenders for you," says Tompkins.
Perhaps you are in the middle of a big cross-country move or buying houses while trying to sell your current one. One of the greatest advantages of working with a mortgage broker is the time they can save you.
Low credit buyers
Since factors like bad credit, a low down payment, or even a high debt-to-income ratio can affect your ability to obtain credit, these are all situations where a mortgage broker could make your job easier.
"You may need a broker if you have low creditworthiness or other challenges that can hamper your mortgage application from being successful," says Tompkins. "In such cases, you need someone to help you select a lender who is most willing to work with you."
How to Find the Best Mortgage Rates
Whether or not you work with a mortgage broker, there are a few things that you should keep in mind that can help you find the best mortgage rate.
"Getting the best mortgage is an exercise in tweaking four things – down payment, interest rate, closing costs, and monthly payment," said Fred McGill, broker and CEO of SimpleShowing Real Estate. “These four levers can be adjusted to best reflect and optimize your lifestyle and income. Most first-time buyers, however, will want to focus on getting a low down payment mortgage in order to reduce the outlay costs owed at closing. "
How you prioritize these four things depends on your finances. However, remember that it is possible to get a traditional loan with as little as 3% less. And since current interest rates are still at an all-time low, you should be looking for the lowest possible fixed rate on your mortgage. This directly affects how much you pay over the long term and how much your monthly payments are.
Additionally, once you've identified some potential lenders, McGill recommends reviewing the associated closing costs for each loan. "Some lenders have higher interest rates but offer lower closing costs, and the opposite may be true," he says.
Hire a good mortgage broker
Similar to a real estate agent, referrals are the best way to find a good mortgage broker. Talk to friends and family to see who they've worked with, or even ask your real estate agent.
Remember, while a good local mortgage broker can make your life easier, you can also get the job done by yourself. Since there is an endless list of things to do when buying a home, it is good to strike a balance between helping and doing chores yourself.
Ready to stop worrying about money?
Get the Penny Hoarder Daily