Understanding Mortgage Brokers

Finding ethical and well-suited mortgage brokers is a critical component in the process of shopping around for your new home mortgage. Due to the competitive nature of mortgage markets, it is highly advised that homeowners receive quotes from multiple mortgage brokers in order to explore various rate offers and other opportunities to save on your home loan mortgage.

Mortgages brokers can also use their knowledge and resources to assist borrowers that have poor credit history or other unfavorable situations to search out lenders that can best meet their financing needs. It should be noted that mortgage lenders do not actually set actual mortgage rates themselves, instead these rates are dependent on the current situation of the secondary mortgage market. The secondary mortgage market is a market where primary investors sell existing home loans to investors.

A mortgage company typically has more flexibility than banks in terms of lending to borrowers. Although banks typically fund a large proportion of home loan mortgages compared to all other lenders, mortgage brokers actually arrange more than 80% of these transactions between borrowers and lenders. For this reason, finding experienced mortgage brokers is very important because they can save you money in the long run. Furthermore, mortgage brokers are paid by mortgage lenders, not by you.

The Main Responsibilities of Mortgage Brokers:

  • Advertising and marketing to attract new and existing homeowners to their mortgage company.
  • Evaluating the home loan market to find rates and lenders to meet the borrowers needs.
  • Evaluating the client’s financial situation (credit history, income requirements, etc.).
  • Connecting the borrower with the lender in order to get a pre-approval.
  • Collecting required documents and facilitating the application process.

Concerned about Mortgage Fraud?

Consumer laws have advanced considerably over the past few years in order to better benefit and protect the security of consumers. There are now limits enforced on the amount that a mortgage company can charge borrowers and specific criteria that mortgage brokers must meet in order to charge borrowers with additional fees. These newly enforced laws have effectively helped to reduce costs to borrowers.

Furthermore, The Federal Real Estate Settlement Procedures Act makes it mandatory for a mortgage company or lender to provide borrowers with a good-faith estimate of the settlement costs associated with the home loan. The lender is required to release a good faith estimate to the borrower after 3 days of the borrower signing the loan application.

The good faith estimate details all the settlement costs or closing costs associated with the home mortgage, such as taxes, title insurance, inspection fees, and various other fees. Closing fees can vary anywhere from 3 percent to 5 percent of the total price of the home, therefore homeowners should shop around to get good faith estimates from multiple lenders in order to obtain the best possible deal.