Mortgage brokers don't work for free, and if you use one, that increases the cost of your mortgage loan. Mortgage brokers generally charge a fixed commission equivalent to 1% to 2% of the total cost of the loan. If you pay it as a borrower, it can form part of your closing costs or be incorporated into the loan amount. Sometimes, the lender will pay the mortgage broker (since, after all, it is the agent who makes the lender do business with him).
While this may seem less expensive in theory, your lender could include the broker's commission in the cost of your loan. Mortgage brokers must disclose their fees in advance, so that's something you can ask when looking for a broker. If you pay the mortgage broker, they can't receive any additional compensation from the lender; either you pay or the lender does. For the best of both worlds, get loan quotes from at least one broker and one bank when looking for a mortgage to see which one can offer you the best deal. In addition to answering your questions about how to get a mortgage loan, a mortgage broker can help you gather the documents and information you'll need to apply for a mortgage.
In some cases, mortgage brokers can get lenders to waive some or all of these fees, which can save you hundreds to thousands of dollars. If you're just starting out looking for mortgage financing, you may find it helpful to get quotes from a variety of mortgage brokers and bankers. Mortgage preapproval and mortgage prequalification are often used interchangeably, but there are important differences between the two. If you're planning to buy a home, it's helpful to understand the differences between a mortgage banker and a mortgage broker, so you can make the best decision for your mortgage financing needs.
When a mortgage broker first presents you with offers from lenders, they often use the term good-faith estimate. For example, if you're having trouble qualifying for a mortgage or if you value convenience a lot, it may be worth hiring a mortgage broker. You may be able to save yourself a lot of the headaches associated with the loan process if you work with a mortgage broker, but you'll still need to do some research to find a mortgage broker right from the start. Yes, both mortgage brokers and banks can offer some flexibility when negotiating loan terms and rates. While you don't need a mortgage broker to facilitate the transaction, some lenders may only work through mortgage brokers.
Even if you're a borrower who wouldn't have trouble getting a mortgage, an agent will meet with you (in person or virtually), discuss loan options, highlight comparison points, and help you make an informed decision. Even if you don't qualify for a mortgage loan right now, your mortgage loan agent will help you understand exactly what needs to change before you can receive a mortgage pre-approval letter and how to obtain one. It's always smart to compare prices, compare the rates of different lenders, including banks, and work with a mortgage broker who can offer a wider range of options.
