Brokers can help you secure a bridge loan — or other types of loans — at competitive rates. Bridge loans can be difficult to find and secure if you don’t know where to look. Thankfully, brokers are experienced professionals who know how to find the best loan deals for bridge loans and beyond.
Everything You Need to Know About Brokers
Brokers work with different lenders on your behalf to provide you with expert recommendations and favorable loan terms. Brokers can help guide you through the loan process from start to finish — a service that’s invaluable to those new to loans and real estate. Brokers charge a fee for their services that is either paid by the borrower or the lender.
Pros and Cons of Working With a Broker
There are both pros and cons of working with a broker that you should know about in order to make the right decision:
Brokers have more knowledge about and access to different loan products from a wide variety of different lenders to best meet your needs.
Brokers may be able to get you a better deal by negotiating with lenders on your behalf to waive fees or lower interest rates to save you money.
Brokers streamline and simplify the buying process since you’re working with a single individual and submitting a single application.
Brokers often charge fees that may be higher than what you would otherwise pay if you were working directly with a lender.
While there are some lenders who work exclusively with mortgage brokers, there are other lenders who do not work with mortgage brokers at all.
For some people, brokers may not be able to get you the best deal. If you are a highly qualified borrower or have an existing relationship with a lender, it may make more sense to work directly with a lender.
Different Types of Loans Offered by Brokers
Perhaps the biggest benefit of working with a broker is that you’re able to access many different types of loans. Navigating all of these different loan types can be confusing on your own, which is why brokers provide recommendations on the best types of loans based on what you’re looking for and your financial situation.
Here are just some of the different types of loans that you can get when you work with a broker:
Bridge loan: A bridge loan is a short-term loan with terms that typically don’t extend past one year. This type of loan “bridges the gap” between closing and permanent financing with quick and easy application and closing processes. Bridge loans can be used by investors and homebuyers alike for both commercial and residential properties.
Balloon loan: A balloon loan is a relatively short-term loan with terms that typically range from five to seven years. During the term of the loan, the payments aren’t designed to cover the entire amount. Instead, the borrower makes smaller payments that may only cover interest before having to make a large “balloon” payment at the end of the term to cover the remaining balance.
Jumbo loans: A jumbo loan is a loan that is used to finance properties that are too expensive for a conventional conforming loan. The Federal Housing Finance Agency (FHFA) sets a limit of $548,250 in most areas, although the limit is higher in more expensive areas. These loans come with stricter requirements since they cannot be guaranteed by the federal government and are riskier for lenders.
Conventional loans: A conventional loan is not backed by the federal government either, although they still can be purchased by federal housing entities to provide more liquidity to banks. They are the most common type of real estate loan thanks to favorable interest rates.
Adjustable-rate loans: An adjustable-rate loan involves an interest rate that can change throughout the term of the loan. Although adjustable-rate loans typically start out with interest rates that are lower than those offered by fixed-rate loans, they can always increase. Since interest rates are so low right now, adjustable-rate loans are quite uncommon since interest rates are only expected to rise rather than fall further.
Fixed-rate loans: A fixed-rate loan involves an interest rate that remains constant throughout the term of the loan meaning that your monthly payments will remain the same. This type of loan is popular as it is less risky and more predictable than an adjustable-rate loan.
When It Makes Sense to Use a Broker
Brokers benefit some people more than others. Here are some situations where it may make sense for you to use a broker to find the right loan product for you:
You don’t have great credit and are struggling to find loan products that you qualify for on your own. A broker can help you find the best loans for your credit score.
You’re looking for a specific type of loan that’s not easy to find. Bridge loans aren’t offered by many lenders but a broker can help you secure this type of loan at a favorable rate.
You’re looking for someone to help guide you through the loan process. Brokers are great for first-time borrowers that may not know what to look for or expect during the process.
You’re looking for the best interest rate and terms possible for your loan. Brokers negotiate with lenders on your behalf for the best rates and terms.
You’re looking for a more streamlined and simple process that doesn’t involve multiple applications, credit checks, meetings, etc. With a broker, you only have to deal with one person and one application.
How to Find a Great Broker
While working with a broker may be advantageous for some, not all brokers are created equal. So how can you find a great broker that can help you access all these benefits? The best place to start is to ask family and friends for recommendations. Perhaps they worked with a broker in the past that they would recommend.
If you don’t get any leads from family and friends, the next place to look is online. The best places to look online are Google and Yelp as these platforms allow former clients to leave reviews for the broker. Make sure to read these reviews before moving forward with any candidates. From there, you need to set up meetings with your potential candidates to ensure the best fit possible.
What to Look for in a Broker
From locating a potential broker online, to communicating with them through email, to meeting them in-person, here are some things that you should look for:
Make sure that your broker practices good communication, responds quickly, and answers all your questions.
Make sure that your broker is licensed by the National Mortgage Licensing System and Registry (NMLS) by using their online database.
Make sure that your broker hasn’t had any disciplinary actions taken against them by your state regulatory body.
Make sure to also check the Better Business Bureau to make sure that your broker hasn’t had any complaints filed against them.
Questions to Ask a Potential Broker
While your broker should ask you the right questions to better understand what you need in a loan, you also need to ask them questions to determine if they can actually meet those needs:
What are your fees? Some brokers’ fees are paid by the lender while others are paid by you — the borrower. If you’re the one covering the fee, make sure that it’s a good rate. Most brokers will charge about 1% of the loan amount for their fees.
How much can I borrow? Brokers will be able to calculate how much you can borrow based on your debts and income. However, just because you can borrow up to a certain amount doesn’t necessarily mean that you should.
What loan do you recommend? Brokers should be able to recommend the best type of loan based on your financial situation. Make sure to discuss your needs and wants to get the best recommendation.
What lenders do you work with? Different brokers work with different lenders. Make sure that your broker can cast a wide net with a variety of different lenders to get you the best rate and terms.
Can I speak with a former client? Always ask your broker for references to make sure that they are as good as they say they are!
Final Thoughts on Bridge Loan Brokers
Finding and securing a bridge loan on your own can be challenging. If you’re looking for this specific type of loan, working with a broker can be beneficial. Even if you’re not specifically looking for a bridge loan, brokers can help you find the best loan and terms.