How To Choose The Reliable Mortgage Advisor?
By Space Coast Daily // March 22, 2021
When purchasing a home there are several things that you have to take into consideration. In the financing aspect, there’s your budget, credit score, debt situation, and your budget to think about.
All this can be a lot especially to first time home buyers. Buying a house is an investment so you want to be making the right decisions and having a reliable mortgage broker as your advisor might just help you make a successful home purchase!
To start off, let’s define what a mortgage broker is. In the simplest way, a mortgage broker is the middle man between the client and the lenders. Mortgage brokers can help you get the best rates and take a huge load off all the things that you have to do.
It is a common misconception that mortgage brokers work for lenders but that’s not true. Despite their involvement in the process, they do not organize the home loans itself.
Now that’s out of the way, it’s time to discuss the actual process that your mortgage broker will help you with:
■ Evaluating your credit score – this part is essential because your credit score will determine what type of loans you can get. The mortgage broker can discuss with you what type of loans you can get with your score. They can also give you advice if you want, or if they think that it’s best that your credit score be higher first.
■ Review your debt to income ratio – this is also important because it is something the lenders look at. The lenders want to know if you already have a lot on your plate or if you can take care of the loan. What the mortgage broker can do is give you advice on how you can lower your debt to income ratio, if it’s low enough.
■ Suggest the types of loan suited for you – there two types of loans: conventional and government backed. Under these types there are multiple lenders to choose from and this is where your mortgage broker comes in. They will connect you with lenders who they think you can get the best deal with.
Do note that although mortgage brokers are very knowledgeable in the financial aspect in home purchasing, if you have major issues consider meeting with a financial advisor instead.
In terms of payment for the mortgage broker’s service here are the two ways they are paid:
1. Lender-paid compensation – this means that they are compensated by receiving a percentage from the lender.
2. Borrower-paid compensation – this is when they request a payment from you, the client.
The basics are now out of the way! Time to discuss the advantages of brokers:
■ It will be easier to understand unfamiliar terms and conditions.
■ They can provide a wide range of rates and options.
■ They can provide assessments in different financial aspects.
■ You can end up with the loan and deal that is best for you.
■ They can complete the paperwork for you,
■ They can offer advice for any step of the house purchasing process!
Now that you know the advantages, to be transparent, there are also a few reasons why it’s not ideal for you to work with a mortgage broker.
■ If you can look for lenders that do online assessments and rate quotes you may not need a broker.
■ There are also amazing websites that can do a mortgage brokers job like Home Lending Pal.
■ If you have a tight budget then you can cut costs by not hiring a broker.
■ If the mortgage broker doesn’t work with a wide array of lenders.
If you’re already planning on working with a mortgage broker before proceeding, it is important that you ask them how big their pool is. You want them to have enough contact with lenders so that they can get you the best deal possible.
Also ask them about their fees. If you can it is also helpful to get some testimonials from previous clients so that you are aware about the mortgage broker’s service quality. You want a broker that leaves his or her clients satisfied with their home purchase!
Remember the decision is yours! Talk to banks, loan providers, and mortgage brokers before anything else. Maximize your options and learn about these options. Even though all of this can seem a lot and daunting, a little bit of preparation will make your home purchase a smooth process.
To also give you an idea, here are the risks of not seeking the help of a mortgage broker:
■ If you’re inexperienced, you may end up getting the wrong mortgage for your situation.
■ Your application might get rejected by your chosen lender because you don’t understand the requirements or criteria needed.
■ Your personal time would be wasted doing the wrong thing
If all is settled and decided. It is time to look for a mortgage! Be aware of the things that you can give you the lowest interest rate possible. Look out for:
■ APRC (Annual percentage rate of charge) – this takes some mortgage fees into account as well as the interest rate and expresses it as a percentage.
■ Deposit Size – if you can choose an option with a higher deposit because that means low interest rates.
■ Standard Rate – What rate will your mortgage switch to once your fixed rate deal ends.
■ How often will you be charged? – Will you pay your interest daily, monthly, or annually? Hint: daily interest comes out the cheapest option.
■ Flexibility – Can you take a break from making payments and can you overpay without being charged.
■ Length of fixed or variable rate deal: do you want to be locked in for a long period. or have more flexibility? There will be charges if you switch out of a deal before it ends.
Again, this may be something that your mortgage broker can help you with. They are very knowledgeable in these things.
At the end of the day, it is your home you are buying so it is your choice. Be smart and happy house hunting.