More Americans than ever are using a mortgage broker to help them navigate the wide variety of home loans on the market today.
If you’re buying for the first time or refinancing and have never used a broker, you’re probably asking yourself whether you need any help.
It’s simple enough to apply for a loan; you can step into any bank and do that.
The challenge is finding the deal that best suits your circumstances.
Mortgage brokers offer a variety of loans from multiple lenders, so that’s a wider choice than any single lender will give you. You don’t pay brokers anything for their service as lenders pay their commissions.
While that minimises your risk, I’ve listed six questions you should ask a broker before giving them your business:
What’s the lowest rate for me?
The only relevant rates are those you qualify for. A broker’s answer will depend on your income, credit rating and whether you’re looking to buy a house or apartment. They’ll explain the lowest rate can often come with the highest fees. So, stay open to all the possibilities they present.
Should I go for a fixed rate?
With speculation that rates will continue to rise, this is a relevant question. Your broker will explain the pros and cons of going with a fixed or an adjustable rate mortgage (ARM). They’ll also talk to you about a split loan and other options, like an offset account.
What’s my minimum deposit?
The answer can depend on each lender’s approach to risk. If you can’t raise a 20% deposit, you’ll probably be asked to pay mortgage insurance. It’s an expensive policy that protects the lender if you default on the loan. Programs for first-home buyers offer a much lower entry point. These include VA loans for military personnel and veterans, and Federal Housing Administration packages.
What are the fees?
Your broker will explain the fees being applied to any loan they recommend. These may include penalties for switching loans mid-term or even paying off the debt ahead of schedule. You will also be provided with a breakdown of any estimate, as required by the Consumer Financial Protection Bureau.
What’s the deal with your commission?
Don’t be afraid to ask your broker how they earn their commissions and who’s responsible for paying them.
Do you have insurance?
Every broker must have professional indemnity insurance. If they make a mistake or give faulty advice, the insurance ensures you’ll be financially compensated if you make a successful civil claim.
I hope you’ve found these tips for using a broker helpful. If I can help you find the next home of your dreams or sell your current property, please do not hesitate to contact me.