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Essentially, a mortgage broker is an intermediary between a buyer looking for a mortgage and potential mortgage lenders. It’s their job to find good mortgage rates and terms for homebuyers, as well as help them apply for a mortgage, help manage fees, and go big. work so that their client only has to sign on the dotted line. But they can get expensive: A mortgage broker often costs about 1% of the loan’s value, says Jacob Channel, senior economic analyst at LendingTree. This means that on a loan of $ 300,000, you can expect to pay $ 3,000 out of pocket. So who is this cost worth and who should find a loan on their own?
One of the main reasons for using a mortgage broker is that they can make finding a mortgage easier, Channel says. But “if you have a regular job and most or all of your income is reported on W-2 forms and your credit is good, then a direct mortgage lender may be sufficient,” adds Holden Lewis, housing expert. and Mortgages and NerdWallet. said.
But if your financial situation is more complicated, a mortgage broker can be of great help. “They tend to be familiar with a variety of different lenders and this is especially useful for people with unique financial profiles or those with things that lenders tend to hate like a low credit score or not a lot of. money for a down payment, ”Channel says. Indeed, borrowers who do not fit the mold of the employee par excellence with a stable income, can really benefit: “Maybe they are self-employed or they live on investment income or ‘they have fluctuating income. They are not your ordinary borrowers. They should back up their claims with bank statements and tax forms that require expertise to understand. Brokers match these borrowers with lenders who have the right knowledge, ”says Lewis.
Another reason to consider using a mortgage broker is if you are a borrower rebuilding credit after suffering a stroke related to the pandemic. “Brokers find lenders who work with these borrowers,” says Lewis. “If your financial life is complicated because you own a business or your income varies a lot, or if your credit is bad, then you may get good results by going to a mortgage broker. “
And when it comes to finding a mortgage broker, Lewis says referrals are definitely the best option. “Ask your colleagues, friends, family and real estate agents for the names of mortgage brokers they have been satisfied with,” Lewis says.
Once you find a broker you like, Channel asks you to contact them by phone or email to verify that they are able to work with someone who has your financial profile. “You can ask them about the number of lenders they know, the type of clients they usually work with, and the fees they typically charge. Look for potential red flags, like if they can name only one lender they work with or if their fees seem unnecessarily high, ”says Channel. “At the end of the day, you want to look for a broker who has a clean record, who seems to be familiar with the different lenders and types of loans, and who has experience with people like you,” Channel explains.