Real Estate & Personal Finance: How Do Mortgage Brokers Help in the Home-Buying Process?
Preparing You to Buy
Many mortgage brokers are experts at getting you ready to buy a home. In fact, some real estate agents require that you talk to one before you even start looking at houses. “For many borrowers, the work gets done before they ever apply for a loan. Between getting the information they need to apply for a loan and cleaning up credit issues, there's a lot to do,” explains Jonathan Mosca, a seasoned mortgage professional. Since mortgage brokers work with many lenders, they have a keen understanding of what lenders look for in a borrower and can help you to prepare yourself to meet the lender's scrutiny.
Finding a Lender
“When you work with a lender, you have a lender. When you work with a broker, you have access to every lender,” explains Mosca. Mortgage brokers are independent professionals that shop your loan package between different lenders. They don't just look for the best deal, though. They also look for a lender that can provide a loan that meets your needs. Plus, mortgage brokers know how to shop around. If you go to lenders yourself, you'll have to compare many different offers with slight differences in terms, all described differently. A broker does all of the work of comparing those offers for you.
Saving You Money
Mortgage brokers frequently get paid by marking up your interest rate through a mechanism called a yield spread premium. However, this doesn't mean that a loan from a mortgage broker will cost more than going directly to a bank for your loan. Most lenders have two rates – the retail rate that they charge you when you come through their door asking for a loan, and the wholesale rate that they charge when a broker originates the loan. Since the broker does the work of finding you, packaging your loan, and getting you ready to close so you can start paying interest, it makes good business sense for the bank to charge a lower rate so that the broker can get paid. In fact, with the deal that a good broker can bring you, you may end up paying less through him than through a direct lender.
The Power of Relationships
If you're an important customer to your bank or credit union, they might give you better treatment than someone off of the street. However, if you're not planning to get a loan through them, you'll just be a single, one-time customer to your lender. Mortgage brokers, because they place many loans with lenders and give lenders their repeat business, are often important to the lender. The relationships that brokers form with employees at lending institutions help them to get your loan closed more quickly and smoothly. As Mosca explains, “I repeatedly work with the same people at the same banks. I have their cell phone numbers and I know when they're going on vacation.” These working relationships can help brokers get the deal done.
Holding Your Hand
“Realtors know houses, but they don't know loans like I do,” says Mosca. “When it comes to the nitty gritty of providing the bank with the documentation what they need, or helping to explain your situation in a way that they can understand, no one beats a mortgage broker.” Throughout the loan process, your mortgage broker serves as your liaison, not just with the lender you choose, but with all of the other professionals that are part of the transaction, for example, title and escrow officers. Depending where you live, attorneys might also be part of the picture. Brokers are your single point of contact and your companion throughout the process. Many will even attend the closing to help you understand the documents that you're signing.