Often, the most favorable loan is through a mortgage broker. Your real estate agent should be able to provide a list of preferred mortgage brokers, or you may browse profiles of mortgage brokers in your area. But before you decide, it's important to know what a mortgage broker does and what you should expect from them.
- What does a mortgage broker do?
- Lenders and loan officers
- Interest rates and the price you actually pay
- Why work with a mortgage broker?
Mortgage brokers bring together lenders and borrowers. They stay on top of the market, build a network of relationships with qualified lenders to help find a loan that best suits the needs of each individual borrower.
A lender is the actual bank or financial institution that finances the loan.
A loan officer is an officer within a bank or other financial institution who sells only loans offered by their employer.
In addition, mortgage brokers counsel borrowers on any problems they may have in qualifying for a loan, including credit issues. Brokers help identify the best loan to meet an individual's needs, searching lenders to find the best deal.
Once your broker has secured your loan, he or she will compile and provide you with all the necessary state and federal documents required for the transaction.
Once a broker secures your loan, they get the wholesale rate from the lender. It's up to the individual broker to derive the retail price by adding markup to the original terms of the loan.
Markups vary, which means it's a good idea to shop around to find the best rate. The broker's fees should be very clear from the outset. If they're not, you'll want to find another broker.
Working with a broker has two distinct advantages:
- They have access to several different lenders, allowing them to find a loan for you at (ideally) the most competitive rate.
- They are trained in how to shop the lender market effectively and have access to information that the average consumer does not.
It is not necessary to use a broker to secure a loan, and working with a broker does not guarantee a better loan. However, on average borrowers who work with a mortgage broker save more when compared to those who secure a lender on their own.