What Should You Look For In A Mortgage Broker Or Lender?
There are many different places where a buyer can secure a mortgage to purchase a home. Deciding on where to secure financing and the type of financing to use to purchase a house is one of the most important steps to buying a house.
Since deciding on where to secure financing and the type of financing to use to purchase a house is so important, it’s critical buyers know what tips to follow when doing so.
“How can I successfully find and choose a mortgage broker or lender to buy a home” is a frequently asked question regarding mortgages and home loans. There are tons of mortgage brokers and lenders out there, so as you can imagine, there are some great companies, some average companies, and some terrible companies.
Below, learn about the differences between a mortgage broker and a mortgage lender as well as find out what the top 5 tips are for finding and choosing one. Buyers who follow these tips greatly improve their chances that they select the right place to secure financing and also select the proper type of home loan.
What’s The Difference Between A Mortgage Broker & Mortgage Lender?
As a buyer is preparing to get a mortgage, one of the first decisions they’ll have to make is whether to use a mortgage broker or a mortgage lender. Many buyers don’t realize there is a difference between a mortgage broker and a mortgage lender.
A mortgage broker is basically a middleman between a potential borrower and mortgage lenders. Mortgage brokers help potential borrowers secure the best type of mortgage and rates. Mortgage brokers make their money by charging origination and/or broker fees, which are paid once closing occurs.
A mortgage lender is the actual organization who provides the funding for the purchase of real estate. An example of a mortgage lender includes credit unions or banks. Mortgage lenders will portfolio a loan and borrowers will pay them directly. While many lenders decide to keep their mortgages in house, it’s still possible some mortgage lenders can sell a mortgage, similar to a mortgage broker.
Ask For Referrals / Recommendations
One of the most popular tips for choosing a Realtor is asking family, friends, colleagues, or others who’ve recently purchased or sold a home. The same can be said for finding and choosing a mortgage broker or lender!
In addition to asking family, friends, and colleagues for recommendations, asking a real estate agent is also highly recommended. An experienced buyers agent will have access to several brokers or lenders they’ve worked with in the past and had positive experiences dealing with.
One of the top reasons to hire a buyers agent when buying a home is because of their knowledge of top professionals and companies that’ll be needed throughout a real estate transaction!
While asking for referrals and recommendations is a very popular tip for finding and choosing a mortgage broker or lender, buyers should not only follow this tip exclusively. Just because an acquaintance or real estate agent recommends a specific mortgage broker or lender doesn’t mean they are the right fit for you.
Research Mortgage Brokers Or Lenders Online
The internet has changed the real estate and mortgage industry significantly, both in positive and negative ways. There are many common internet mistakes made by home buyers, one of which is believing that online mortgage calculators are 100% accurate.
The internet has made a positive impact though for home buyers who’re searching for mortgage brokers or lenders. A great tip for finding and choosing a mortgage broker or lender is to research potential companies online.
There are dozens of review based websites available for consumers who’re researching mortgage brokers or lenders. A simple search on Google of a mortgage broker or lender can often provide some helpful insight into a company from others who’ve used their services in the past.
Popular websites to visit to research potential mortgage brokers or lenders include Facebook, Google Business, Yelp, Better Business Bureau, Trust Pilot, and Zillow. These websites provide reviews from previous customers which can be very helpful to a potential buyer.
Learn About Mortgage Brokers Or Lenders Products
If you’ve purchased a home or you’re thinking about possibly purchasing a home, undoubtedly, you’ve asked yourself this question!
One of the top tips for finding and choosing a mortgage broker or lender is to learn about the products they offer. Each and every mortgage broker or lender will offer different types of mortgage products.
For example, some lenders will not offer FHA home loans. The same lender may also offer a first time home buyer program that a mortgage broker does not.
Since every home buyers circumstances are different, it’s vital they find the best mortgage product. This may require shopping around and talking with several mortgage brokers or lenders.
Understand What Fees Are Charged
Before completing a mortgage application with a mortgage broker or lender, it’s critical to find out exactly what fees are charged. There are many different costs of buying a home, many of which are directly associated with the mortgage broker or lender that a buyer chooses.
Being aware of “common” mortgage fees can be very helpful. Below are some of the most common mortgage fees to be on the look out for.
- Appraisal Fee – One of the most common mortgage fees is a bank appraisal fee. Mortgage brokers or lenders will charge a fee to a borrower to send a licensed appraiser to the subject property to assess the property, review the market conditions, and prepare an appraisal report. The appraiser is hired by the broker or lender to ensure the property is safe and also the property is actually worth the agreed upon sale price between the buyer and seller.
- Rate Lock Fee – Another fee that some mortgage brokers or lenders will charge is a rate lock fee. The rate lock fee basically protects a broker or lender in the event the current interest rates increase significantly and the loan isn’t as attractive because the borrower “locked in” at a much lower rate.
- Application Fee – Depending on the broker or lender, the application fee will vary and potentially can even be waived. The application fee is generally used to cover the cost of pulling a credit report and the processing of the application. Some brokers or lenders will also build the cost of the appraisal into their application fee.
- Origination Fee – An origination fee is typically charged when working with a mortgage broker. Since the broker is working as a middleman with the lender, the origination fee is charged to compensate their efforts. The origination fee can be avoided by working with a lender directly, however, it’s important to keep in mind the broker is looking out for a borrowers best interests which in many cases is worth paying the origination fee!
- Processing Fee – The mortgage processing fee is charged to borrowers to cover the cost of actually processing the loan. This is often charged by brokers who pay a third party processing company. The processing fee is often negotiable, so in the case broker isn’t willing to negotiate, you may want to consider shopping around a bit more.
- Underwriting Fee – The underwriting fee is sometimes referred to as an administrative fee. This fee is charged to cover the costs of closing and funding the loan. The underwriting fee will vary from company to company.
Ask The Right Questions
Asking the right questions when talking with prospective real estate agents is always highly recommended. Home buyers who know the right questions to ask real estate agents when buying a home will generally have a better experience than those who don’t.
Since asking the right questions when talking with agents is highly recommended, shouldn’t asking the right questions when talking with mortgage brokers or lenders be highly recommended as well? The answer is a resounding, YES!
Below are 10 of the most important questions to ask mortgage brokers or lenders. By asking these questions, buyers can save themselves money, time, and frustration!
- What are the interest rates currently?
- What loan programs do you offer?
- Which type of mortgage product is best for me?
- What are your origination fees?
- Are there any other fees or costs I should know about?
- Can you provide a breakdown of all closing costs?
- How long does your company take on average to process a loan?
- What type of documentation will be required?
- Are your loans processed in-house or by a third party company? If processing is done by a third party company, are they located in the same city or state?
- Will my loan be sold?
If a mortgage broker or lender struggle to answer these questions easily, you may want to shop around and talk with a couple other brokers or lenders. Buyers should never feel awkward about asking these questions since they’re very important.
Finding and choosing the right mortgage broker or lender is very important! Buying a home is one of the largest purchases most people make in their lives so working with a top company makes sense. The above tips for finding and choosing a mortgage broker or lender should be absolutely be followed.
Other Helpful Mortgage & Home Financing Resources
- What Are The PROs & CONs of FHA Home Loans?
- What Are The PROs & CONs of VA Home Loans?
- Reverse Mortgage PROs & CONs via Bill Gassett
- Tips For Saving For A Down Payment To Buy A House
- What Is A Mortgage Rate Lock? via Kevin Vitali
Are you trying to choose a mortgage broker or mortgage lender in Rochester NY? The above 5 tips should be extremely helpful! If you haven’t hired a top Realtor in Rochester, contact me so we can discuss your home search. I have several different mortgage brokers and mortgage lenders in the Rochester area who provide top notch service.
About the authors: The above article “5 Tips For Finding And Choosing A Mortgage Broker Or Lender” was written by Kyle Hiscock of the Hiscock Sold Team at RE/MAX Realty Group. With over 30 years combined experience, if you’re thinking of selling or buying, we’d love to share our knowledge and expertise.
We service the following Greater Rochester NY areas: Irondequoit, Webster, Penfield, Pittsford, Fairport, Brighton, Greece, Gates, Hilton, Brockport, Mendon, Henrietta, Perinton, Churchville, Scottsville, East Rochester, Rush, Honeoye Falls, Chili, and Victor NY.
© 2017, Kyle Hiscock. All rights reserved.