A mortgage broker charges fees, but they rarely say how much they charge. Most fees are hidden and are based on the cost of the loan. This cost is passed on to the borrower, who pays one to two percent of the loan principal to the lender that purchases the loan. Before you sign on the dotted line, make sure you understand the fee structure. There are certain things to look out for, however.
Questions to ask a mortgage broker
When buying a home, you choose to use a Finance Valley, who will act as a middleman between you and the lender to help you navigate loan documents and secure the best mortgage for your needs. While some home buyers prefer to work directly with a lender’s loan officer, you should still do your homework before hiring a mortgage broker. Here are some questions to ask a mortgage broker before using one:
Fees charged by a mortgage broker
A mortgage broker earns his or her money by collecting a commission from the lender who offers you a mortgage. The fee can be rolled into the loan amount or paid separately at closing. Fees charged by a mortgage broker can be capped by federal law at 3 percent, but some brokers may charge you a higher fee. Brokers cannot charge kickbacks or receive hidden fees from lenders or affiliated companies.
Working with a mortgage broker does not guarantee the best deal
You should know that working with a mortgage broker does not always mean getting the best deal. While mortgage brokers have access to several lenders, they cannot close the mortgage for you. Instead, they work as intermediaries between the borrower and a lending institution to get the loan approved. A broker will work with you to determine the ideal lender for your needs, compile paperwork for the underwriter, order a home appraisal, and prepare for closing day.
Choosing a mortgage broker
If you are self-employed, a mortgage broker can be a huge help. Brokers handle the legwork of chasing lenders on your behalf and can help you secure a more competitive interest rate. However, you should know that some mortgage brokers offer minimal services, while others provide maximum assistance. Before choosing a mortgage broker, you should make sure you understand what services they offer. Some brokers can only assist you with the mortgage application process, whereas others can be quite helpful.
Choosing a mortgage broker online
A mortgage broker can help you get a better deal on your mortgage. They negotiate on your behalf and are required by law to act in your best interest. They explain the features of each loan, including fees, and handle the entire loan process through settlement. While banks are a good choice for some, they may not be the best option for those with bad credit or with less-than-perfect credit. To avoid the hassle of contacting different banks, choose a mortgage broker.