Florida FHA Loan Requirements 2023
Buying a home is a big investment that takes a lot of thoughtful financial planning. Luckily there are several financing options, some that even...
Bryan Capriles
:
April 1, 2022
5 min read
If you’re looking for the best deal on your mortgage, you may want to consider working with a mortgage broker. Many borrowers don’t know much about mortgage brokers’ services and the fees they charge for said services.
Here’s what you need to know about working with a mortgage broker to secure a loan:
A mortgage broker is a financial professional that works with borrowers and mortgage lenders to secure mortgage loans. Mortgage brokers themselves are not lenders, but they can connect you with one that offers the right loan product for your financial needs. Mortgage brokers should spend time getting to know your financial situation to find the right product for you.
Essentially, a mortgage broker acts as a middleman between the lender and the borrower and receives compensation for doing so. Brokers work with many different lenders that offer different loan products. They do all the work and negotiation for you to find the best possible home loan options.
Loan officers, on the other hand, work directly for a financial institution. As a result, they can only provide you with information regarding the loan products offered by that specific financial institution. While this is a more direct process, it may limit the different kinds of loans you can find.
There are both pros and cons to using a mortgage broker that you should consider before moving forward:
Overall, keep in mind that mortgage brokers may not always be the best deal sourcing option for everyone. If you are a highly qualified borrower or have a good relationship with a bank, it doesn't hurt to shop around and see what terms you can negotiate with a lender directly.
Mortgage brokers don’t offer their services for free. Instead, mortgage brokers charge fees that typically range from 1% to 2% of the loan amount. So if you use a mortgage broker for a $200,000 loan, you can expect to pay anywhere between $2,000 and $4,000 in fees.
While you should always check the fees associated with any potential broker before agreeing to work with them, federal law prohibits mortgage brokers from charging over 3% of the loan amount or fees directly tied to the loan’s interest rate. Federal law also prohibits brokers from charging hidden fees.
Now that you know that mortgage brokers charge between 1% and 2% of the loan value in fees, you’re probably wondering who has to pay those fees. There are two different payment options. The first option involves the borrower paying any broker fees in a lump sum at closing. The second option involves the lender paying any broker fees at the time of closing.
While the second option might seem better as it allows you to avoid paying these fees up-front, you will still end up paying them. When the lender pays your mortgage broker fees, they will simply add the sum of the fees to your total loan amount. As a result, you’ll also have to pay interest on this extra amount. So even though it may be tempting to choose this option, you’ll end up paying more at the end of the day.
It’s easy to find a loan officer — all you have to do is walk into a bank or a credit union. But where do you find a mortgage broker? Here are some different places where you can look:
Speaking of vetting, even if you receive a great referral for a mortgage broker or find one on a reputable online directory, you still need to do your due diligence before working with them.
Here are some of the different things you should ask when considering a mortgage broker:
You should shop around with a few different brokers to get the best rates. By doing your research and asking these questions, you can find the right fit for your needs.
If you’re looking for the right mortgage designed for you, then you need to connect with the mortgage specialists at Vaster. Our mortgage professionals offer tailored guidance with fast closings to help meet your mortgage needs. We offer loan services for different asset classes, including residential, commercial, and vacant land.
Reach out today to see how we can help you get the best deal on your loan.
Sources:
Mortgage Broker Definition | Investopedia
Should I Work With a Mortgage Broker? | US News
Questions to Ask a Mortgage Broker Before You Work With Them | Business Insider
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