Shopping for a mortgage can be an intimidating process. If you think you'd like some help, you might consider going through a mortgage broker.
A mortgage broker doesn't actually make loans, but instead helps you find a lender who will offer you a loan on attractive terms. In that respect they function like an independent insurance agent, having contacts with a variety of companies and able to match you up with the one that best suits your needs.
May be useful for jumbo loans or weak credit
Mortgage brokers can be particularly helpful if you have circumstances that might make it difficult to shop for a mortgage on your own. You may have a weak credit score, have limited funds for a down payment and closing costs, be in the market for a jumbo loan or simply lack the time to research various lenders on your own.
In those situations, a broker may be able to recommend one or more lenders who will lend to someone in your situation or will offer more attractive terms than other lenders might.
You do have to pay for this service, of course. In most cases, the broker's fee is rolled into the loan itself, either in the form of a slightly higher interest rate or added to the closing costs. You can save money by finding a lender on your own, but that depends on whether you have the time or inclination to research various lenders to find the best deal.
Finding a broker
So how do you find a good mortgage broker? The best way, of course, is by personal recommendations from family and friends. Failing that, look up several in your that seem to specialize in loans for borrowers in your circumstances and contact them by phone. Eliminate any that seem unprofessional, don't give you straight answers to your questions, try to pressure you in any way or who you just feel uncomfortable with.
Of the others, pick a few and meet with them at their offices - don't let them come to you. You can tell a lot about a broker's operation by the way their office is run- does it seem professional, courteous and efficient? If a broker doesn't even have an office on the other hand, that may be a sign they're new and inexperience or simply haven't been able to generate enough business to afford one.
It's also a good idea to look for a broker who is a member of the National Association of Mortgage Brokers (NAMB), which certifies mortgage brokers and demands that they adhere to certain ethical standards. The NAMB has three levels of certification, being general mortgage associate (GMA), certified residential mortgage specialist (CRMS) and certified mortgage consultant (CMC), in ascending order.
What to expect
A broker should interview you about your mortgage needs and present you with a variety of options, which he or she should be able to explain in detail. Avoid brokers who give incomplete answers or try to push you toward one particular option without exploring alternatives. Also, don't sign anything committing yourself to working with just that broker - you're entitled to work with as many different brokers as you wish, and don't have to commit to any until it's time to actually submit a mortgage application.
Be aware that some lenders are reluctant to work with mortgage brokers these days, because some brokers had a tendency to steer risky clients to them and hide their shortcomings. That's another reason it's important to find a reputable, professional broker - the good ones will still have their relationships with lenders intact.
You should also be aware that a broker is not necessarily obliged to look out for your best interest. In some cases, brokers have been known to steer borrowers to loans that were more profitable for them, rather than beneficial to the borrower. That's why you have to stay on top of things by asking the right questions and preferably obtaining mortgage offers from several different brokers.
Ask about compensation
In particular, you should ask a broker how they get paid and what their compensation is for a particular loan - and does it differ from other loan offers you might consider. Other questions to ask include what is the APR (annual percentage rate) on a loan, what are the closing costs and any other fees that might be included.
If you've got a credit rating of 780 and can put 30 percent down on your home purchase, you probably won't need a mortgage broker - you can likely find a lender who'll offer good terms on your own. But if you don't fit the ideal borrower mold or are looking for a jumbo loan or have other special requirements, going through a mortgage broker may be the sensible thing to do.