If you’re shopping around for a mortgage, consider enlisting a mortgage brokers services to help you find the rates and terms ideal to the individual consumer. After the 2008 crash involving the real estate market, brokers are scrutinized to ensure they’re acting ethically and with the best interests of consumers in mind. A mortgage broker with experience can bring customers excellent results. However, there may also be some disadvantages to be considered before working with one.
Advantages of Working with a Mortgage Broker
It Saves You Time and Effort
Being in constant contact with various banks and lenders, both household names and those lesser known, mortgage brokers have ideas you never even thought about. Plus, as a bonus, an experienced broker can protect you from some unscrupulous lenders with hidden terms that would cost you more. The important thing is to work with a reputable broker, so do your research before meeting with one. Look into average mortgage rates and use a mortgage calculator readily available online. These tools can help you clearly see and compare rates, so you know a bit more on the subject before you have your meeting.
Mortgage Brokers and Their Exclusive Lenders
It may surprise you to know that some lender actually works privately and exclusively with brokers who are encouraged to bring a certain clientele to them. This means you like wouldn’t have any access to these lenders without the mortgage broker. Additionally, special rates may be given to brokers for the sheer volume of loans they generate, meaning they can provide their clients with lower interest rates!
Save Money and Fees
Numerous fees exist in new mortgages or new lenders, such as application, appraisal, and origination fees. Sometimes, brokers can even encourage lenders to waive certain fees so that you can save thousands of dollars in certain cases.
Disadvantages of Working with Mortgage Brokers
Conflict of Interest
The actual goal when mortgage shopping is finding a loan with the best terms – lower fees and interest rates. Consider that this is usually a long-term commitment. On the other hand, mortgage brokers make their income from fees the lender pays them for the business. The fees are based on loan amounts and generally differ from one lender to another. In other words, the mortgage broker’s goal is to get the best compensation. Not surprisingly, many brokers were found acquiring mortgage loans their clients simply couldn’t afford – something revealed in the real estate market crash in 2008.
It May Not Be in Your Best Interest
Brokers aren’t always better, and they don’t always find better deals than a client can obtain on his own. It’s not uncommon for home buyers to be offered the same interest rates and terms as are offered to mortgage brokers by lenders. Therefore, it could be in your best interest to shop around and ensure you’re actually getting the best deal possible. With a mortgage calculator, you can easily fact check your broker’s deal.
There Aren’t Always Guaranteed Estimates
A mortgage broker usually provides an initial estimate or offer from a lender, in what is called a “good faith estimate.” Though it is believed to stand and incorporate the terms, it is not guaranteed. Therefore, there are some instances where terms are altered by the lender, leading to more fees or higher interest rates.
Not All Lenders Work with Brokers
Since the crash of 2008, to protect themselves more, some lenders are eliminating the mortgage broker, as direct lending was found to be more successful and less likely to default. As such, you may not be able to benefit from direct lenders, who sometimes, have better deals to offer than those offered by brokers.
The Reality of it All
You can benefit greatly from working with a mortgage broker, but before committing to one, weigh the pros and cons. Do some research on your end by contacting lenders yourself to get a better understanding of mortgages and what’s available. Every situation is different, but doing your homework will reveal the best solution and the best broker who can provide references and guaranteed loan estimates, so there aren’t any unpleasant surprises for you down the road.
Learn more about the contributers:
DLC Origin Mortgages
2608 Granville St #550, Vancouver, BC V6H 3V3