Though you will be the only one paying the mortgage every month, there are many people involved in the purchase of a new home. You’ll be dealing with a real estate agent, a home inspector, a lawyer, your insurance company and a banker at your lending institution. In recent years, a new player has emerged in the real estate scene and you hear more and more these days of people using a mortgage broker to find them the best interest rate. So what’s the deal? Is visiting a mortgage broker in your best interest when shopping for a lender? There are pro’s and con’s you should certainly consider before making any decisions.
A mortgage broker is a trained professional who will represent you and find the best borrowing rates from a pool of hundreds of lenders such as chartered banks, credit unions, trust companies and private lenders. Their services are free to homebuyers as they paid by the lender, and therefore privy to the lowest borrowing rates. A broker may be particularly beneficial to buyers with poor credit or high debt as they are often able to secure loans from alternative lenders. In addition to their connections and experience, they also offer convenience. Brokers do the legwork for you. They can help with every aspect of a mortgage, from determining how much you can actually afford to finding ways to save money and pay off your mortgage faster.
The bottom line is that brokers are paid by the very lenders who you are trying to get the best deal from. Lenders pay financial incentives to brokers who send them a certain amount of volume. If you are a long-term customer with a financial institution, you may have developed a strong relationship with your own bank. As a loyal customer, you may be rewarded with lower borrowing options, special interest rates or waived home appraisal fees, as gratitude for committed service.
If you do decide to use a mortgage broker, select one based on positive feedback from people you know who have used their services. Choosing a broker online or on the other side of the country increases your chance of trouble. Brokers need to be familiar with local by-laws and classifications and available to provide personal service if you need it.