March 7th, 2011 6:41 PM by Dana Bain
How Can A Mortgage Broker Help?
When most people consider buying a home, they have a good understanding of what mortgage lenders and real estate agents are, as well as the roles they play but not many people understand the role of a mortgage broker. For starters, this professional is someone who acts as an intermediary selling mortgage loans on behalf of businesses, and sometimes, individuals. The mortgage broker is licensed and typically represents a number of lenders and offers multiple loan options than what a person would find from a commercial lending institution.
In addition to understanding the role of a mortgage broker, it is also important to learn the various ways in which this professional is different and often better than a traditional commercial bank. For instance, if you were to visit a commercial bank, you would find several loan programs and interest rates available. Depending on the bank, some have set Annual Percentage Rates for each type of loan while others do not. In some instances, a bank allows loan officers to deviate somewhat on rates but this is relatively rare. Then, every bank has its own rules loan officers must follow when securing loans.
On the other hand, a mortgage broker usually represents anywhere from 20 to 40 lenders, which means instead of limited mortgage loans, one interest rate per loan, and a firm set of rules to follow for a 30-year loan, the broker could provide literally 20 or more rates and sets of criteria for the same type of loan. Another difference is that a mortgage lender can move a loan to a different lender if your request was denied. Upon being denied a mortgage loan, a mortgage broker has the ability to this by looking at the other possible lenders within the pool of financial institutions he or she represents.
The mortgage broker can also help by securing the loan for less money. When you go directly to a bank, mortgage company, or credit union, you are being charged premium rates whereas the mortgage broker can secure the same loan but at a wholesale price. Now, the broker would mark the wholesale price up to make a profit but when working with a reputable broker, the markup would be enough to benefit him or her but also reduce the cost you would pay compared to what the bank would charge.
For instance, if a bank were charging 6% Annual Percentage Rate with closing cost of $1,300, a broker could probably lock into interest at 5.75% and reduce closing costs to $1,000 or less. Unlike commercial banks that have to follow strict rules, mortgage brokers have greater flexibility. Therefore, based on the amount of markup, the broker would be has the power to lower both interest rate and closing costs. This amount would vary from one broker to another but in all cases some degree of savings would be seen.
Another way in which a mortgage broker could help is by reducing fees associated with a mortgage loan. Again, when securing a loan through a commercial lender, a number of fees apply, with the cost adding up quickly. However, mortgage brokers can actually add or subtract the same fees charged by banks. Keep in mind that it is relatively common for a mortgage broker to have one or two more fees than what a bank would charge but because they have more control over the amount charged to you, the total cost of fees is usually less.
Finally, when it comes to excellent customer service, in most cases it would be easier to get answers needed from a mortgage banker. Granted, scheduling in-person time with a representative from the bank would likely be easier than with a mortgage broker but brokers always provide a website, as well as toll-free phone number where a wealth of information is found. Therefore, instead of trying to get in to see a bank representative, often the information needed can be obtained easier from a mortgage broker.