Ever wondered about the meaning of Mortgage Brokers? Mortgage brokers are individuals or companies that are licensed to “broker” mortgages. This means they connect you to mortgage lenders in order for you to get the best offer possible. Brokers will work with you when applying for a mortgage to help in various ways.
Mortgage brokers: A Brief History
Mortgage brokers emerged in the mid-20th century, after the federal government passed the Real Estate Settlement Procedures Act of 1974. This law mandated that mortgage lenders reveal their fees, including brokers’ commission.
Mortgage brokers have become increasingly popular in recent years, thanks to changes in how mortgages work. In the past, if you applied for a loan from a bank or mortgage lender, the loan officer would shop your file to other lenders. Today, lenders typically originate loans themselves and sell those loans to other businesses, including mortgage brokers.
Mortgage brokers come in two varieties: direct lenders and loan correspondents.
Direct lenders are companies that originate loans, and they usually charge borrowers origination fees, which are typically 1 to 3 percent of the loan’s amount. Once a loan is funded, the lender typically charges borrowers an interest rate that’s set when the loan is closed.
Loan correspondents, by contrast, don’t originate loans, but act as middlemen between lenders and borrowers. They charge borrowers a rate that’s determined by the lender, and they typically charge borrowers fees that lenders charge. These fees are usually 1 to 3 percent of the loan’s amount, though some loan correspondents charge a flat fee.
Mortgage brokers typically charge borrowers higher interest rates than direct lenders, and they also charge borrowers origination fees, which can be substantial. Mortgage brokers usually charge borrowers 0.5 to 1 percent of a home’s value as origination fees. But because the origination fees can be significant, borrowers should consult with more than one mortgage broker to compare fees.
Mortgage brokers typically charge borrowers higher interest rates
Why do you need a Mortgage Broker
If you cannot obtain a mortgage from a bank, then you should contact a mortgage broker in Toronto. There are a lot of mortgage brokers in Toronto, and each of them will try to get your mortgage. This, of course, means that you will have a lot of options to choose from.
The difficulty is that you do not really know which mortgage broker in Toronto is best suited to meet your needs. You therefore need to carry out some research so that you can get the best possible mortgage broker in Toronto.
The task of this research is to find a mortgage broker in Toronto who is suitable for you. It is important that the mortgage broker has the necessary expertise and experience to take care of your needs.
It is best to get recommendations from people you know and trust.
You can also find a list of mortgage brokers in Toronto on the Internet.
You can check the services offered by each of the mortgage brokers in Toronto. This way you will know which mortgage broker in Toronto is best suited to your needs.
Mortgage Broker Duties
Mortgage brokers work with lenders to find the best loan terms for a home buyer. A mortgage broker is not a lender. A mortgage broker finds lenders for clients, completes loan applications, obtains approvals, opens accounts for borrowers, and collects payments.
Mortgage brokers also do the following:
- Research loan options and rates.
- Gather information about a client’s current employment status, current income, and credit history.
- Act as liaison with the lender.
- Arrange for appraisals, home inspections, title searches, surveys, and other property studies.
- Review and approve documents.
- Prepare closing documents.
- Provide clients with the name, address, and telephone number of the lender.
- Follow up on overdue payments.
- Negotiate lower loan rates and fees on behalf of clients.
- Explain to clients all fees and loan terms.
- Meet with clients at the closing.
- Make sure clients understand all loan details and the terms of their mortgage loan.
- Help clients find a mortgage loan that is appropriate for their needs.
- Review all documents to ensure that clients understand all loan details.
- Explain to clients the duties and obligations of owning a home.
- Explain how a client’s monthly payment is calculated.
- Explain to a client the importance of making timely payments.
- Explain to a client how to pay a mortgage off in the shortest amount of time.
- Provide copies of all closing documents.
- Help clients prepare
Advantages of Using a Mortgage Broker
A mortgage broker works for you, not the lender. Unlike a mortgage lender, a mortgage broker does not make money by charging you a higher interest rate. In fact, most brokers work with multiple lenders, so they can get you the best mortgage rates.
Using a mortgage broker also means you won’t have to worry about filling out mountains of paperwork. Most brokers handle the entire process for you, saving you both time and effort.
Mortgage brokers are licensed professionals who are trained to ask the right questions, so you can get the best mortgage for your financial situation.
A mortgage broker will also do all the legwork for you. They can find the right type of mortgage for you, help calculate your monthly payments, and walk you through every step of the process.
Mortgage brokers are familiar with a wide range of lenders, which means they can help you compare offers from as many lenders as possible.
A mortgage broker can also help you avoid some of the mistakes people make when applying for a mortgage. For example, many first-time homebuyers think they need a huge down payment. A larger down payment means a larger mortgage, which can mean higher monthly payments. A smaller down payment means a smaller mortgage, which can mean lower monthly payments.
And a mortgage broker can help you choose the right type of mortgage for your financial situation.
For example, a mortgage broker can help you choose between a fixed-rate or adjustable-rate mortgage, as well as between a 30-year or a 15-year mortgage.
A mortgage broker can also help you make smart choices about your mortgage, such as choosing a shorter-term mortgage if you have a large emergency fund or choosing a longer mortgage if you’re planning to move in a few years.
Disadvantages of Using a Mortgage Broker
A mortgage broker usually offers several mortgage options and can compare rates among several lenders to find the most competitive deal.
Here are some disadvantages of using a mortgage broker:
- Mortgage brokers have to get licensed by each state they work in.
- Mortgage brokers often charge a fee for their services.
- Mortgage brokers generally do not have as many options as lenders.
- Mortgage brokers often do not have flexible underwriting guidelines.
- Mortgage brokers typically can only offer conforming loans.
- Mortgage brokers don’t offer cash-out loans.
- Mortgage brokers cannot offer VA loans.
- Mortgage brokers generally cannot offer FHA loans.
- Mortgage brokers typically cannot offer jumbo loans.
- Mortgage brokers typically cannot offer cooperative loans.
- Mortgage brokers don’t offer construction loans.
- Mortgage brokers typically cannot offer loans for mobile homes.
- Mortgage brokers don’t offer rent-to-own loans.
- Mortgage brokers can’t offer home equity lines of credit.
- Mortgage brokers don’t offer second mortgages.
- Mortgage brokers cannot offer “no money down” loans.
- Mortgage brokers cannot give advice on whether to buy a home or to rent.