Authored by Heaven Stubblefield in Mortgages
Published on 09-09-2009
A mortgage broker is someone who sells mortgage loans for banks and other business. A mortgage broker doesn’t actually lend money. Mortgage brokers work with lenders and buyers to find the most well suited mortgage for lender and buyer. Brokers usually work with many lenders sometimes having hundreds in their contact list to choose from. This helps mortgage brokers find loans for difficult borrowing needs, like poor credit. Individuals seeking money from a bank will not have nearly as many choices as a mortgage broker who works with many wholesale lenders.
Cons of using a Mortgage Broker
The recent burst of the housing market bubble is in part due to mortgage brokers who did not have their client’s best interest at heart. The yield spread premium is a bonus paid to a broker by a lender after the loan is closed. This fee is paid in addition to any other fee paid by the borrower directly. The yield spread premium bonus sometimes leads untrustworthy mortgage brokers to recommend loans with higher rates or worse terms than a borrower qualifies for. Some mortgage brokers may overcharge a borrower or not be very knowledgeable about the home loan process. It is always important to find the right broker with an excellent reputation.
Pro of using a Mortgage Broker
A mortgage broker has access to a large number of different kinds of loans which can save the borrower thousands of dollars and excessive leg work in finding the right home loan at the best rate possible. When an individual borrower obtains a loan from a bank they get retail interest rates but because a mortgage broker works with hundreds of lenders they are able to get wholesale interest rates which are much cheaper. Brokers also have more flexibility than an individual when it comes to getting financing for a tricky loan, like a loan for someone with poor credit. A mortgage broker takes care of all the bureaucratic red type involved with a home loan that can be quite stressful for a borrower.
Some questions to ask a broker to make sure they are professional and trustworthy.
Make sure they are licensed by the state and affiliated with a mortgage association. Get a list of a mortgage broker’s references and find out what kind of reputation they have. Be sure to always ask if you are getting the best possible interest rate based on your credit score. Ask a broker how many loan options they can provide and what fees they will earn on your loan, including the fees that the lender is paying.
Mortgage brokers sometimes have a bad reputation for not having a borrower’s best interest in mind and convincing borrowers to take on loans they cannot afford. Some borrowers have an excellent long standing relationship with their bank and do not need the services of a broker. Some borrowers can become overwhelmed with all the legwork involved in finding a home loan lender and find it hard to work with banks if their credit score is less than desirable. Mortgage brokers have more knowledge and experience with more lenders than any individual borrow could possibly have.