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When financing a home purchase, a mortgage broker is like a matchmaker in a relationship: They can match you with a lender to help you find the best mortgage for your needs, secure a competitive interest rate, and save you time and money.
But just like the way a good matchmaker can make a big difference in finding the right partner, it's essential to choose the right person to partner with when financing a home. Follow these steps to find the right mortgage broker for you.
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As with any important financial decision, thorough research is the first step to making sure you choose wisely. Here's how to get started:
Reach out to friends and family. Ask your family and friends if they have used a mortgage broker when buying a home. Were they satisfied with the service they received? Was the mortgage broker knowledgeable and attentive? Would they work with them again?
Get referrals from your real estate agent. Your real estate agent should have a pulse on local mortgage brokers in your area and be able to recommend qualified individuals to work with you. Real estate agents make a commission after a home is sold, so they have a vested interest in recommending a good broker who can get your loan closed.
Read online reviews. Read reviews on Google or Yelp about the mortgage broker's ability to get the job done. For example, how long did it take for the customer's loan to be approved? If there were any stumbling blocks in the transaction, how did the mortgage broker deal with them? You should also pay attention to what reviewers are saying about the mortgage broker's communication, organizational, and problem-solving skills (or lack thereof).
You can verify if a mortgage broker is licensed by checking your state regulator or the Nationwide Mortgage Licensing System & Registry. The Better Business Bureau can also indicate if there have been any complaints about the broker and whether those issues were resolved.
Just as it is recommended to shop around when comparing mortgage lenders, you should do the same when choosing a mortgage broker. After doing your research, narrow down your list to at least three candidates. Then, you can ask them these questions to determine if the broker is the right person for you.
What types of products do you offer? One benefit of working with a mortgage broker is that they partner with many lenders and provide borrowers with various mortgage options. But, just like with a lender, a mortgage broker may not have access to every loan. So if you are interested in a specific loan type — like a VA or FHA loan — make sure the broker offers that option.
Are you experienced working with borrowers in my situation? Find out if the mortgage broker has worked with borrowers who match your specific needs, such as having bad credit or wanting a particular type of loan. Of course, there's no guarantee the mortgage broker will get you the best deal, but if they're familiar with your situation, they could help you access loan types that might not be on your list.
What lenders do you work with? A mortgage broker may work with a set of preferred lenders, making the home loan process easier for you by reducing time spent shopping around. But some lenders don't work with mortgage brokers at all. If you want a connection to a specific lender, make sure your broker can offer it — or point you in a similar direction that might be a good fit.
What are your fees? Mortgage brokers are required by law to disclose their fees. Typically, they are paid 1% to 2% of the loan amount as a salary or commission (by law, the maximum fee mortgage brokers can charge is 3% of the loan amount). Mortgage brokers can either be paid by lenders or borrowers, but they can't be paid by both parties. If the borrower pays the fee, it can be paid upfront or rolled into the loan amount. You can avoid mortgage broker fees altogether if you choose not to work with a broker and instead find and select a lender yourself.
Show you are financially prepared
A mortgage broker can make getting a home loan easier by connecting you with a lender. But you can also make the entire process smoother by ensuring you are financially prepared before selecting your mortgage broker.
Show your mortgage broker that you have done the work ahead of time by pulling your credit report. Until April 2022, you can access your credit report at AnnualCreditReport.com for free every week from the three credit reporting bureaus: Experian, Equifax, and TransUnion. You should also check your credit score to get an idea of what types of loans are available.
Finally, it would be best if you also began compiling documentation the broker may need. These documents may include personal information like your Social Security number, driver's license, and financial information such as recent bank statements, federal tax returns, and W-2 forms.
Just as with a matchmaker, while the mortgage broker will connect you with your eventual partner — in this case, a lender — you want to make sure the person you choose to work with has your best interests at heart throughout the process. Again, researching and comparing mortgage brokers and preparing your finances ahead of time can help you find the right one for you.