The Ultimate Guide to Hiring a Mortgage Broker
Through this article, we will help you understand what is a mortgage broker, the pros and cons of hiring one, and what they can help you with.
Let’s get started.
What is a Mortgage?
A mortgage is a loan that’s provided by a bank or a lender. It enables an individual to purchase a property such as a house. It’s possible to take a loan to cover the entire cost of the horse, people prefer to secure a loan for 80% of the house’s value.
The loan needs to be paid back within a stipulated time at the agreed rate by the borrower to the lender. Mortgages are of two types: adjustable-rate and fixed-rate mortgages. Depending on the type of mortgage you opt for, you will have to pay a monthly payment to the lender.
What is a Mortgage Broker?
A mortgage broker is a middleman who oversees the mortgage process and loans for other people or businesses.
– Corporate Finance Institute
In simple words, a mortgage broker is a person who connects a mortgage lender with a borrower without using their own funds to establish the connection.
A mortgage broker educates himself on the financial standing of the person who wishes to borrow the money. Next, they connect them with a lender who’s a good fit and is providing a good interest rate for the borrower.
Mortgage brokers collect the necessary information from borrowers and pass it to the potential lenders for approval/processing of the loan.
Duties of a Mortgage Broker
Mortgage brokers do a lot of things and therefore, their duties vary depending on the kind of services they’re offering. Usually, their duties include:
• Offering their services to new clients
• Educating and assessing the financial position and the circumstances of the potential borrowers
• Researching the marketing and determining a source of mortgage product that’s suitable for the borrower
• Assisting the borrower with obtaining pre=approval for the loan
• Collect all important documents such as payslips, bank statements, etc.
• Complete the mortgage loan application
• Ensure that legal disclosures are understood by the borrower
• Submission of the documents to the lender
• Ensure that they source a wise money-saving option for the borrower
How Does a Mortgage Broker Work?
Mortgage brokers work with everyone that’s involved in the process i.e. from the underwriter and real estate agent to the closing agent. They ensure the borrower gets a fair loan and also that the loan closes on time.
A mortgage broker can either work with a brokerage firm or independently. They research loan options, negotiate with lenders on behalf of the borrower (client) and ensure that their client gets the best possible loan.
A broker checks the buyer’s credit reports, verifies their income and expenses, and coordinates all the loan paperwork.
A good mortgage broker will have access to an effective loan-pricing system that prices a mortgage loan across different lenders at a time to speed up and streamline the process.
Advantages of Hiring a Mortgage Broker
Here are four solid reasons why you should work with a mortgage broker.
1. They help you get lower fees and interest rates as they have access to more lenders. They’re almost always able to get you a better deal than you can get for yourself.
2. They help save time. A mortgage broker does thorough research on fees and rates. Their negotiation skills are impeccable and their experience makes the entire process easier.
3. A mortgage broker can save you from making a huge mistake. They know their job which makes it easy for them to identify pitfalls. Since they know the industry well, they’re able to navigate the process and lenders efficiently.
4. They can help you find a lender even if you’re in a tricky situation. The property you are planning to purchase may be unusual or your credit history may not be impressive. However, a broker will be able to find you a lender who’s more flexible with down payments, credit scores, or specializes in a specific type of property.
Disadvantages of Hiring a Mortgage Broker
Here are three things to take into consideration before hiring a mortgage broker.
1. Some lenders may not work with a mortgage broker. Additionally, not all brokers have access to loan programs at a particular financial institution that you wish to be associated with.
2. Generally, brokers take the fee from the lender. However, there are brokers who also charge the borrower. Therefore, it’s best to clarify this early on.
3. There can be a conflict of interest. Since the lender pays the mortgage broker a commission, he may ask the broker to favor him. In such a situation, you will not get the best possible deal.
Questions to Ask Before Hiring a Mortgage Broker
It’s best to clarify the following things before hiring a mortgage broker:
• Who pays the fees and how much do they charge? Your broker may charge from you, or the lender, and in some cases from both parties. Therefore, it’s best to clarify this before you get too far in the process.
• Which lenders do they work with? Usually, brokers have an assortment of lenders that can help you. However, not all brokers work with the same set of lenders. So, if you want a VA loan and your broker doesn’t work with VA lenders, then this broker isn’t right for you.
• How experienced are they? It’s wise to hire a broker that has been in this industry for at least three years. If you require help with a particular type of loan, then consider the broker’s experience in that kind of loan.
• Are they licensed to do business in your state? Check to ensure that the mortgage broker is licensed to work in your state.
• Do they have references? You may have found a broker through a friend or a co-worker. But, it’s smart to check for other references. Ask your mortgage broker to provide you with the contact information of at least 5 of his recent clients. Speak to his clients and understand how knowledgeable and trustworthy the broker is.
• How do they handle rate locks? Rate locks are guarantees that you get a particular quote for a specific period of time. The rate remains “locked” at your quote so it doesn’t matter if the rate goes up or down during the stipulated time. Usually, the rate lock lasts for 30-60 days. Understand how your broker deals with rate locks and what documentation they get done to ensure you get a fair deal.
How to Become a Mortgage Broker NZ
Are you good with numbers and wish to create a career in the field of mortgage and real estate industry? If yes, then becoming a mortgage broker might be the right choice for you.
According to Glassdoor, mortgage brokers in the US have an average annual income of $70,000 which is higher than the national average income i.e. $54,000 last year.
Nedwallet states that a mortgage broker is paid by the lender once the loan is closed. The fee is usually 1% to 2% of the total amount of the loan.
Wondering ‘How to Become a Mortgage Broker NZ? According to Careers.govt.nz, are the entry requirements to becoming a mortgage broker in New Zealand:
• Have graduated in the field of finance or have knowledge of subjects such as business studies, accounting, economics, and maths.
• Meet personal requirements such as being able to pass a criminal convictions check, having good communication skills, being able to work under pressure, being organized and motivated, and having good negotiation skills.
• Be a registered financial adviser under your own Financial Advice Provider or your employer’s license. To obtain this, you will have to register on the Financial Service Providers Register and register with a dispute resolution scheme.
• Have useful experience. This includes managing others, and having knowledge of property markets, valuation, and management work. Additionally, you should have work experience in the field of banking, accounting, finance, or real estate.
The Best Mortgage Broker Tauranga
Our list covers the best mortgage broker Tauranga, Bay of Plenty, and surrounding suburbs.
- Know How Property. Their company is a shining star in all of New Zealand. They’re reliable, knowledgeable, and friendly and are known to get the best deal for their clients. They make the entire process easy and smooth and deliver great results.
- WealthHealth. They’re a small but highly efficient team of mortgage brokers. The aim of the company is to ensure that you get the best mortgage structure. Their services include (but are not limited to) refinancing and first home loans. They’re known for delivering sound financial counsel to their clients.
- The Mortgage Supply Co. This Auckland-based company is run by three mortgage advisors who specialize in first home loans. Clients love them because they’re dedicated and honest. In addition, they’re professional but the team cares about their clients and supports their vision and dreams.
Mortgage Calculator and Mortgage Rates NZ
You can use a mortgage calculator to understand the estimate of the monthly payment and other financial costs associated with the mortgage. There are a lot of free mortgage calculators that have options to include annual percentage increases and extra payments of other expenses related to the mortgage.
Visit sites like mortgagerates.co.nz to view Mortgage Rates NZ. It’s an online resource that provides the latest rates, mortgage information, news, and data for New Zealanders.
How Much Can I Borrow For a Mortgage?
The rule of thumb is that you can afford a mortgage that is 2 to 2.5 times your gross income. For instance, if you are earning $100,000 per year, then you can afford a mortgage of $200,000 to $250,000. However, every lender maintains its own criteria for affordability. Generally, your ability to purchase a property depends on your Gross Income, Front-End Ratio, Back-End Ratio, and your credit score.
How to Reduce Mortgage Repayments
Here are a few tried and tested ways to reduce mortgage repayments.
• Refinance at a lower rate. It’s worth it if you can lower your rate by 0.5 to 1 percentage point.
• Refinance to a longer term. It’s one of the best ways to reduce your monthly payment amount.
• Apply for mortgage forbearance. This will provide you with temporary relief if you’re facing a short-term financial setback. Inform your lender in advance so that you don’t have to deal with ugly consequences.
• Opt for a loan modification. If you’re facing long-term or severe financial hardship such as retirement or loss of your job, then loan modification may be your only option.
Do I Need a Mortgage Broker to Refinance?
It depends on your financial history. If you have an excellent financial industry, you may be able to secure competitive refinancing terms without the help of a mortgage broker.
On the other hand, if you don’t have an impressive credit history, it’s best to refinance with the help of a mortgage broker.
Working with a competent and experienced mortgage broker will help you find the right mortgage. In addition, they will help you save time and money.
A mortgage broker will help you identify financial pitfalls and loopholes to avoid and help you secure a loan faster and at a better rate.
Evaluate the pros and cons of hiring a broker. Remember to clarify your doubts early on so that you don’t have to deal with any hassles later on.
It’s important to conduct a thorough background check of the mortgage broker you desire to hire. Don’t shy away from asking for references and speak to their previous clients to gauge the expertise of the broker.
The original article was published on the TNZ Web Solutions blog
Featured Image Credits: Unsplash