Buying a home is a daunting task. In Los Angeles, where prices are premium and still rising, it is common for many prospective homeowners to sink their entire life savings into buying a nice house.
For most buyers, especially those who have never owned a house before, pricing isn’t the only issue they face. There are several other questions regarding where to look, what prices to consider, and most importantly, whether working with a mortgage broker is the right choice.
While you could sort through various loan types, rates, etc. on your own, property experts like a mortgage broker Los Angeles are the best way to help secure the proper lender for your home buying. So, before you visit a credit union, big bank, or private lender, here is everything you need to know about working with a mortgage broker.
The Job of a Mortgage Broker
Mortgage brokers are licensed, financial professionals. They act as an intermediary between the borrower and the lender.
Mortgage brokers originate loans to help you connect with lenders that best fit your rate requirements. They do most of the legwork— from collecting documents from the buyer to pulling their credit history and verifying their employment and income— and use that information to apply for adequate loans on behalf of the buyer with different lenders, all within a short period.
Once you decide on a loan and a suitable lender, the mortgage broker will work with the underwriting department of the bank and the closing agent, as well as your real estate agent. This ensures the transaction goes smoothly through the closing day.
How Do Mortgage Brokers Get Paid?
Unlike your local loan officers, a mortgage broker doesn’t work for any banks. As mentioned, they are licensed and operate independently. They charge specific fees for their services, paid by either you, the lender or the borrower.
The fee is basically a small percentage of the total loan amount, between 1 to 2 percent. If you end up paying this fee, the dollar amount will be added to your loan or paid upfront.
This 1-2% of a loan might seem like a ton of money for the lender, or even you, to pay along with the mortgage, which you are already committing to. It’s worth noting that fees will vary, based on the size of the loan. However, there are no hidden fees involved.
Mortgage brokers must disclose all fees upfront. They can only charge that disclosed amount. Also, each fee must be itemized and your broker will let you and the borrower know exactly what the fees were for.
If you’re considering applying for a mortgage, make sure you know how much you will be paying in fees. Learning your mortgage broker fees beforehand will be helpful.
Do I Need a Mortgage Broker?
With all that said, why would you need a mortgage broker in 2020? Well, here are a few possible advantages of including a middleman in your mortgage hunt.
They Will Take Care of Your Rate Shopping
This is easily the biggest advantage of consulting a mortgage broker. A lot of the homebuyers obtain just one mortgage quote from the bank and accept it, although you could apply for multiple mortgage quotes without unfavorably affecting your credit.
A minor discrepancy in mortgage rates could save you thousands in interest during the course of a mortgage. Thus, it is certainly in your best interest to shop around.
Anyone who’s been through the process will tell you one thing: Mortgage applications are long. Applying for ten different mortgage pre-approvals could easily cost you a lot of time and effort. With a mortgage broker, however, all the legwork is done on behalf of you.
More Accessible Compared to a Bank Loan Officer
Similar to your real estate agent, your mortgage broker will work for you and won’t get paid a single penny unless you close the loan. As a result, mortgage brokers are more accessible to buyers as opposed to bank employees and officers.
You will have tons of questions along the way. It is a written fact. And as it so happens, it’s usually easier to get the right answers from a mortgage broker than anyone else.
Some Lenders Tend to Work Exclusively With Mortgage Brokers
A few big-name banks no longer associate with brokers. On the contrary, a good chunk of mortgage lenders works solely with mortgage brokers. Therefore, it’s possible that your broker may have access to loan products you don’t.
Mortgage brokers are able to get lenders to waive a portion of their fees, e.g., origination fees, appraisal fees, and administration fees.
How to Choose the Right Mortgage Broker?
Simply put, the best and most effective way is to ask a family member, friend, or relative for referrals. However, make sure they’ve actually used the mortgage broker at some point and aren’t simply dropping the name of a distant acquaintance. Learn everything about the broker’s communication style, services, level of skills and approach to clients.
Here’s another referral source: Your very own real estate agent!
Consult your agent regarding the issue and get a list of brokers’ names, especially the ones they trust and have previously worked with. Some real estate organizations offer in-house mortgage brokers as part of their suite of services. However, you’re not bound to go with that organization or individual.
Finding the best mortgage broker is equivalent to choosing the right mortgage lender: it is wise to interview at least two or three individuals to determine what services they offer, how much experience they have, and whether they can help simplify the process.
If you have any questions, leave a comment down below. We would love to hear your thoughts and suggestions on the matter.