If you’re house shopping, then pretty soon you’ll be mortgage shopping too. Mortgage brokers are a great resource to help you find the best mortgage for your needs — but like many paid financial services, you can also do the legwork yourself.
If you’ve been wondering whether working with a mortgage broker makes sense for your needs, keep reading. We’ve compiled this list of everything you need to know about working with mortgage brokers, plus some helpful tips on finding the best mortgage rates, with or without one.
What Mortgage Brokers Do
In a nutshell, mortgage brokers can help alleviate some of your stress of shopping for mortgages by doing the bulk of the research for you. Mortgage adviser Mark Robinson of Albion Forest breaks it down: “A broker will find the best mortgage to suit your needs. This doesn’t necessarily mean the cheapest, as you may not actually fit that mortgage criteria,” says Robinson.
“They will generally hold your hand through the whole buying process — from working with solicitors, real estate agents, and getting your purchase across the line,” he added.
As you may imagine, one of the biggest perks of working with a mortgage broker is the time you save. While you can easily shop rates online yourself, it will still take a bit of research (not to mention repeatedly sharing all of your financial details) to see which mortgage lenders will give you the best rates. In this sense, mortgage brokers can be a time-saving middleman. You simply give them your information once, and they’ll set off and find the best possible mortgage for your needs. Mortgage professionals can also be a huge asset when it comes to explaining financial terminology, tapping into their network of lenders to find competitive mortgage products, and even getting you a fast pre-approval letter in order to make a more competitive offer on a home.
One thing to keep in mind about working with a mortgage broker is that you’re not required to go with the loan they find for you. In fact, some people like to work with a broker and conduct their own research just to be sure the broker has found the best loan packages. And of course, if you’re unsatisfied with what the broker finds, you can always strike out on your own and shop mortgage rates online.
That said, make sure you understand a mortgage broker’s fees before enlisting their help. While most mortgage brokers are paid a commission by the lender (usually a small percentage of your loan), some may charge extra fees to buyers — and you’ll want to know that in advance.
Who Needs a Mortgage Broker?
While mortgage brokers aren’t a requirement by any means, there are certain types of buyers who will benefit from their services more than others. Here are a few buyers who might want to consider working with a mortgage broker.
Being a first-time homebuyer is overwhelming enough, even without the added pressure of finding the best possible mortgage rate. “You should consider working with a mortgage broker if you’re unaware about where to find good, credible lenders,” says personal finance expert Carol Tompkins of AccountsPortal.
If you’re a first-time buyer without any experience shopping for mortgages, then you might just enjoy having a mortgage broker around to point you in the right direction.
Another homebuyer who will benefit from the help of a mortgage broker is the one who’s juggling too many things at once. “You might also consider working with a mortgage broker if you don’t have the time or resources to carry out extensive research on the lenders that are most suitable for you,” says Tompkins.
Maybe you’re in the middle of a big cross-country move, or shopping for homes while also trying to sell your current one. One of the biggest perks in working with a mortgage broker is the time they can save you.
Buyers with low credit
Since factors like bad credit, a low down payment, or even a high debt-to-income ratio can all hinder your ability to get a loan, these are all situations in which a mortgage broker could make things easier for you.
“You might need a broker when you have a low credit score or other challenges that may hinder your mortgage application process successfully going through,” says Tompkins. “In such instances, you’ll need someone to help you choose a lender that will be most willing to work with you.”
How to Find the Best Mortgage Rates
Whether you work with a mortgage broker or not, there are a few things to keep in mind that can help you find the best mortgage rate.
“Getting the best mortgage is an exercise in optimizing four things — down payment, interest rate, closing costs and monthly payment,” says Fred McGill, broker and CEO of SimpleShowing Real Estate. “These four levers can be adjusted to best reflect and optimize your lifestyle and income. But most first-time buyers will want to focus on getting a low down payment mortgage in order to reduce the amount of out-of-pocket costs owed at closing.”
How you prioritize these four things will depend on your finances, but remember that it’s possible to get a conventional loan with as little as 3% down. And with current rates still hovering at an all-time low, you should shop around for the lowest possible fixed rate on your mortgage. This will directly affect both how much you pay in the long term and the amount of your monthly payments.
Once you’ve found a few potential lenders, McGill also recommends checking the associated closing costs with each loan. “Some lenders have higher interest rates but offer lower closing costs, and the reverse can be true as well,” he says.
Hiring a Good Mortgage Broker
Much like a real estate agent, the best way to find a good mortgage broker is through recommendations. Talk to friends and family to see who they’ve worked with, or even ask your real estate agent.
Remember, while a good local mortgage broker can make your life easier, you can also do the legwork yourself. Because there’s a never-ending list of things to do when buying a home, it’s good to strike a balance between getting help and taking on tasks yourself.