Buying a home can be a stressful event. You may worry about your budget or which type of mortgage you qualify for. There are many professionals who can help you through the homebuying process. Real estate agents can answer many of your questions as can mortgage lenders. However, a mortgage broker is also a good source of information and help.
Are you in the process of looking for a home and are ready to apply for a mortgage soon? If so, you may not know who you should turn to in order to get help. Many people confuse mortgage lenders and mortgage brokers, thinking that they are the same thing. They are actually quite different, which is why it helps to know the differences before you need to get a loan.
What Are Mortgage Lenders?
Mortgage lenders are the bank that is directly offering you the loan. They often make their own decisions about who they will offer a loan to, perform their own underwriting of the loan, and have direct control over the interest rates that they offer you. While these may seem like great reasons to go with a mortgage lender, be aware that there are drawbacks of working with them.
If you are working with a single mortgage lender, you will be bound to using whatever mortgage products that they offer. This can leave you feeling quite limited if you wanted a mortgage with flexible payment terms or maybe a fixed-rate mortgage that wasn’t exactly 15 or 30 years. You won’t be able to change the loan product that you are using late in the buying process since it will be impossible to change lenders and still meet your closing date.
What Are Mortgage Brokers?
Mortgage brokers are quite different since they are not lending their own money to you. They are taking your information and going to several lenders in order to find you the best deal possible on your mortgage. They act as a middleman between you and the lender and are capable of finding a great lender that will meet your needs.
A mortgage broker does get paid through a commission, so their services are not completely free. However, the savings that they can get you over a 30-year mortgage may be worth it for a lower interest rate. They also have the experience of negotiating with different lenders for you so that you do not have to go through the hassle of doing it yourself.
Everyone has different needs regarding their home mortgage. Consider meeting with a mortgage broker, like those at Pacific Mortgage Group, for a consultation to determine what they can do for you. You may be surprised at the services they can offer to you, especially if you are a first-time buyer without much experience with shopping for a mortgage.
Find Your Price Range
Some buyers aren’t sure about which price range to pursue. Brokers can look at your credit score, debts, and current income to recommend a mortgage price range that is affordable for you. They will most often recommend a mortgage that falls within a certain percentage of your income.
For your monthly payments, you should be paying less than 30 percent of your income. But what does that mean in terms of total cost? When you’re looking at the total cost of a house, brokers will usually recommend financing no more than 200 to 250 percent of your annual income. Sticking to these percentages could prevent you from defaulting on a loan in the future or wasting time shopping out of your price range.
A broker will do all the research of finding what mortgage products you can reasonably expect to qualify for. Then, they can also help you sort out your paperwork and even send it to an underwriter. Once they’ve gathered all of your paperwork, a broker can help you organize everything and prepare for your closing day. Brokers may also help you find someone to do your home appraisal. Ultimately, hiring a broker will help you save time when it comes to closing on your loan.
Brokers have access to various different loan types, lenders, and rates. This means they can negotiate special rates for you, depending on your circumstances, needs, and history. This will save you money throughout the total life of your loan. Some brokers are even able to help buyers eliminate or reduce the cost of certain fees. Mortgage fees can add up to be thousands of dollars, so this can be a big deal.
Get Insider Expertise
Brokers also have a lot of insider knowledge. They can tell you which mortgage products you might be approved for. If you have a lower credit score than the traditional borrower, you may struggle to obtain a traditional loan. However, a broker can connect you with lenders who specialize in lending to those with non-ideal credit profiles.
Reduce Your Stress
Mortgage brokers act as a go-between the buyer and the lender. Brokers don’t finance loans or close any loans. However, they are in contact with various lenders and can help negotiate a deal on a property. This overall reduces a lot of stress on the homebuyer.
Many people close on home loans without using mortgage brokers. However, brokers can help save time and money and also give you practical advice. If you’re a first-time buyer with concerns, consider calling a broker for help.