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When you’re shopping for a mortgage, you have a choice between working directly with a lender or going through a mortgage broker. A broker can help you compare home loans from multiple lenders and find one that’s right for you. A broker can also walk you through the mortgage process from application to closing, providing assistance with the paperwork and possibly speeding up the process.
Nicole Beauchamp, associate real estate broker at Sotheby’s International Realty in New York, recommends finding a mortgage broker at the beginning of the homebuying process because available loans and rates can vary among brokers. And if there’s anything unique about your financial circumstances, some brokers might offer more suitable options than others.
“It’s much better to understand that at the beginning, versus being almost at the finish line or at the halfway point and then trying to figure out what the lending opportunities will be,” she says.
John Aguirre, mortgage broker at Loantown in Davie, Florida, agrees that it’s important to find a broker early. If a homebuyer contacts a real estate agent first, the agent will typically ask the buyer to talk to a mortgage broker or lender before proceeding with a home search. “The Realtor ultimately needs the financing figure in order to determine where they’re shopping, how much they can afford, what’s acceptable in terms of monthly payment,” he says.
While you can find mortgage brokers by searching online, it’s a good idea to ask people for referrals. You can ask friends or family or check with professionals like financial planners. Also, real estate agents and real estate brokers typically have a roster of mortgage brokers they recommend.
Builders are another possible source of referrals. “If hypothetically you are looking in a particular neighborhood or a new build, you may ask them which are the preferred mortgage brokers that are already lending in the project or the development,” Beauchamp says.
Once you have a few names, confirm their credentials to make sure you aren’t dealing with a scammer. “You do not want to potentially end up in an unfortunate situation because you took something at face value and you didn’t dig a little deeper,” Beauchamp says.
To verify that a mortgage broker is legitimate, search for the name on the Nationwide Multistate Licensing System Consumer Access site. The results will show you the states where the broker is licensed and the license number. Check that the license matches the number the broker uses and that it hasn’t expired. You can also see if there are regulatory actions on the broker’s record.
Also visit online review sites to see what other consumers are saying. “I wouldn’t personally recommend utilizing a company that has no reviews or that has bad reviews,” Aguirre says.
After verifying legitimacy, you want to have a conversation. Aguirre recommends that homebuyers ask, “What is my rate, and what am I paying to get it?”
The answer reveals how much you can expect to pay in interest and fees if you go with that broker, and it’s best to get these details in writing. If a broker won’t provide written information, that’s a red flag, Aguirre says.
Beauchamp encourages people to ask how the broker would handle unexpected changes in their financial circumstances, and should be able to present backup plans.
“One thing that I always tell people to ask is, ‘Well, what happens if I lose my job? What happens if I get a new job? How does that change everything?'” she says. “The answer that you get, I think, will tell you a lot about that professional’s ability to pivot or to find something that will work, based on a potential scenario.”
Beauchamp also recommends asking about data security. Applying for a mortgage requires sharing a lot of financial information, and a responsible broker should have systems in place to protect your personal data.
Note whether the mortgage broker is happy to go over your options and address any concerns. You don’t want to work with a broker who tries to shut down the conversation. “If someone is irritated that they feel that you are asking too many questions, follow your gut instincts,” Beauchamp says.
Compare the rates and terms, of course, but it’s also smart to compare track records and specific expertise. If you’re a first-time homebuyer, you might be better off working with a broker who has 10 years of experience helping clients obtain financing for their first homes, rather than a broker who mainly focuses on summer homes for retirees.
Also, choose a mortgage broker who’s accessible and responsive. It should be easy to get in touch with them whenever you have a question. “You don’t want to feel like it’s a game of hot potato,” Beauchamp says.
And you want to work with a mortgage broker who can explain things clearly. The broker should be able to answer questions in everyday language without using a lot of industry jargon.
Above all, you should feel comfortable with the broker you choose. “You want to try and make sure that the style of working is also compatible with who you are, not just the products that they’re offering,” Beauchamp says.
When you decide, contact the broker and let the broker know you’d like to move forward with applying for a mortgage.
The broker will need documentation of your income, including pay stubs from the last two months and W-2s and tax returns from the last two years. You’ll also provide several months of bank statements, investment account statements and other records of your assets. “Have your financials in order,” Beauchamp says. “Have all the PDFs ready to go.”
Often, the lender pays the mortgage broker’s commission. In some cases, the homebuyer might pay the commission when closing on the mortgage.
A mortgage broker can show you a variety of loans with different costs and qualification requirements. It might be worth it to work with a broker if you want help finding an affordable loan or a loan that you can qualify for.
A mortgage broker’s commission is generally 1% to 2% of the loan amount.