When shopping for a car or a computer, people rarely look at one product. Most will compare cost, features, reliability and whether the product meets their specific needs. The same principles should be applied to obtaining a mortgage. A mortgage broker can handle the comparison shopping for the borrower.
A mortgage broker will have a network of dozens of lending institutions offering various rates for individual borrowers. The mortgage broker will do the work of sorting through the various offers and present the most favorable rates and terms to the borrower.
Finding the Best Rate for the Borrower
In mortgage financing a small difference in the mortgage rate can make all of the difference in the world. For example, if a borrower takes out a 30 year, $250,000 mortgage at 5 percent interest, they will pay $229,910.29 over the life of the mortgage. If the rate is lowered to 4 percent, the borrower will pay $176,965.43 over the life of the mortgage. By finding a mortgage at a rate of just one percent less, the borrower will save $52,944.86 over the life of the loan.
Finding the best rate for the borrower is what a qualified and reputable mortgage broker is all about. If you go to a bank for financing, the bank will give you its own mortgage rates. It may offer a few options, such as a fixed rate or a variable rate. It will probably offer 30 year rates or 15 year rates. But it will offer little else. It certainly will not offer the rate of its competitors.
Rather than a limited number of options the borrower will receive from a single bank, the broker offers flexibility in borrowing. Some borrowers may have less in terms of earnest money than others. Some borrowers may wish to avoid high closing costs. Others may need a quicker closing than others. The broker will have access to many different lenders, offering loans that best suit their client’s borrowing needs.
One Stop Mortgage Shopping
The borrower can surf through the internet or spend days on the phone, contacting various lending institutions about their mortgage rates. Even if this is done, the borrower will necessarily present a separate mortgage application, along with supporting documentation, to each lender. This process is very time consuming, and errors can easily occur if one is not familiar with the process.
With a broker, the borrower will complete one application and one set of documentation. The broker will then provide the information to the various lenders in the broker’s network. A good broker will sit down with the borrower and go through the application process with them, insuring accuracy in the application. The broker will provide the borrower with a listing of necessary documentation and provide a good faith estimate of loan costs.
Brokers are paid a fee for their services. The fee may come from the lending institution or a fee from the borrower. The broker cannot collect a fee from both. Usually, the fee is paid by the bank. Keep in mind that a bank loan officer is also paid a fee. It may be a salary, a commission or a combination of both. As with any business, investigate the broker you choose to use, ask for references and discuss fees up front.