Once you have found the perfect home for yourself and your family, you will likely work with a mortgage broker who can lead you through the lending process from start to finish. Your real estate agent may have mentioned a mortgage broker and that you should get one. But what exactly is the part mortgage brokers play in your home buying process? Read on for our guide to understanding the basics of the mortgage broker role.
Understanding the Role of a Mortgage Broker
A mortgage broker is meant to act as a mediator between you and potential lenders. They work on your behalf with banks to find mortgage lenders with interest rates that fit your needs. Brokers already have a developed roster of lenders that they work with, which saves you time and effort.
Applying for Loans
Mortgage brokers are licensed and regulated professionals. They gather documents from you to pull your credit history and verify your income and employment to apply for loans for you with various lenders.
Once you settle on a loan and lender, your broker will collaborate with the bank’s underwriting department, the closing agent or title company, and your real estate agent to complete the transaction through closing.
How A Mortgage Broker Gets Paid
Lender-paid or Borrower-paid
A broker is often paid by the lenders, but sometimes by the borrowers. They are never paid by both. Lender-paid compensation plans pay brokers from .50% to 2.75% of the loan amount. If you choose to pay the broker yourself, that is “borrower-paid compensation.”
What Influences the Rate
When you are deciding on a mortgage broker, ask them what their lender-paid compensation rate and borrower-paid compensation rate is. The competitiveness and home prices of your local market will influence what brokers charge. Under the law, brokers are not allowed to make more than 3% in points and fees.
How to Choose a Mortgage Broker
Friends and Family
The best way to find a mortgage broker is by asking for referrals from friends and family who have used a broker they recommend. Learn about this broker’s services, communication style, knowledge, and approach to clients.
Real Estate Agent
You can ask your real estate agent for a broker referral. Some real estate companies will offer an in-house broker, but you are not obligated to choose them.
Check Their Credentials
Once you have found candidates, check your state’s professional licensing authority to ensure their license is in good standing. Read online reviews and consult the Better Business Bureau to assess the reputation of your potential mortgage broker.
A Title Company You Can Trust: Colony Title
At Colony Title, we will help you through the process of getting your property’s title and help you avoid the pitfalls of hidden costs while you buy your home. We are also well trained in identifying any and all errors in public records and helping you resolve them. We specialize in real estate title insurance in both Maryland and Washington, D.C., and we will perform an expert title search, check through all past documentation, and examine records for any fraud or forgery. For more information on how we can get you into the home of your dreams, contact us online or give us a call at (410) 884-1160. To get more updates on housing markets and how to get into your home, follow us on Facebook, Twitter, LinkedIn, and Google+.