After narrowing the search for your dream home, the next steps are to buy the house and get those keys in your hands. However, the process of buying a house can be a confusing and trying experience. Thankfully, you can hire a mortgage broker such as Courtier Hypothecaire to walk you through the process. With that said, people who have never used mortgage brokers before might be a bit confused as to what they do.
Mortgage Brokers Act as the Middleman
The leading question that people have about mortgage brokers is, “What is a mortgage broker?” To be fair, if you’ve never used mortgage brokers before, it only stands to reason that you might not know what they do. Their job is to act as the middlemen between potential lenders and customers.
Mortgage brokers work with several different banks to find the best mortgage lender to fit your needs. This includes looking for the lowest rates and competitive terms. Since this process can be time-consuming, it’s often helpful for wannabe homeowners to use mortgage broker services.
Mortgage Brokers Charge a Commission
Just like most sales professionals, mortgage brokers have to charge a commission to make money. The commission rate varies between individuals, but the general rate is 1 percent of the loan amount. For example, a mortgage broker who charges a 1 percent commission would earn $4,000 from a $400,000 mortgage loan.
Sometimes this commission is paid at closing, and other times you can work out a no-cost loan in which the lender pays the broker fees. While having the lender pay the fee is helpful, it usually results in a higher interest rate on the loan. You enjoy a lower out-of-pocket expense for a higher payout later.
Differences Between a Mortgage Broker and a Loan Officer
While some people think that a mortgage broker and loan officer are the same, they’re actually completely different. In general, a loan officer is employed by a mortgage lender. This means that these individuals get paid a set salary for writing loans.
Mortgage brokers, on the other hand, are completely independent or work with a mortgage broker firm. While they work closely with lenders, they don’t work directly for them. This means that they have to rely completely on the money that they earn via commission. The larger the loan amount, the more money they earn.
Benefits of a Mortgage Broker
The first and most important benefit of hiring mortgage brokers is that they act as your personal concierge. Unlike loan officers, a mortgage broker doesn’t work for lenders but works independently on your behalf. This is why brokers tend to fight for better mortgage rates and more favorable terms than loan officers.
Also, hiring a mortgage broker will save you a lot of time. It can take many hours to apply for mortgage loans. Even after you apply for a loan, there’s still a lot of back-and-forth communication during the underwriting process. Hiring a mortgage broker can ensure that you don’t have to handle all of these nagging details.
How to Choose a Mortgage Broker
While there are many ways to go about hiring a mortgage broker, one way is to get referrals from friends and family members who have used mortgage brokers in the past. Since they work on commission, they rely heavily on referrals. A mortgage broker who did a good job for a family member will likely strive to do a good job for you so that they can get even more referrals.
Overall, most people save time and money when they hire mortgage brokers. They do the legwork for you and make buying a new home easier. If it’s the first time that you’re buying a home, you have a lot to benefit from hiring mortgage brokers. They can help ensure that you don’t get ripped off in the process or leave out a critical step while buying a home.