When looking to buy a house, every potential future homeowner is faced with a decision of going through a mortgage broker or a big bank. Each choice has its own advantages but, if you are looking to get the best deal possible, a mortgage broker is frequently your best bet.
There are several options that a person can use when looking for a mortgage broker.
1. Decide on Bank vs. Broker
When you go through a major bank to obtain your mortgage, you will get assigned a loan officer that will go over all the new lingo and tell you what your options are in terms of payments. You can usually get a decent rate if you are a skilled negotiator. Like most advertised pricing in negotiating industries, the advertised rate is almost never the best offer. Loan officer get paid through a combination of salary, commission, and bonuses. As a result, they have little incentive to get you the best deal and, sometimes, it can even be quite the opposite (they will make more money if you get a worse deal).
- Big Bank Advantages: coast to coast availability (it is rare to not have a major bank somewhere within your vicinity), extra bank perks such as free-banking, safety deposit boxes, etc., assistance with closing costs such as appraisal fees, possibility of obtaining a home equity line of credit (HELOC).
On the other hand, mortgage brokers are freelancers who work between the lender and the borrower to find the lender the best deal. Mortgage brokers find lenders the best rates by obtaining information from the lender, calculating potential loans, discussing fixed versus variable mortgage options with the lender, and sending out applications to banks. Mortgage brokers can even help people get approved for a mortgage when their credit makes it difficult for them to get an approval from a major bank.
- Mortgage Broker Advantages: a variety of mortgage options that allow lenders to get the best possible rates, more flexibility in terms of obtaining approval for a mortgage, an excellent option for those who dislike hard negotiating (the only way to get a good deal from a major bank), some mortgage brokers offer incentives such as assistance with appraisal fees for word-of-mouth recommendations.
There is a reason as to why some mortgage brokers offer extra incentives to their clients and that is because referrals are a powerful tool for both the business and the client. Family, friends, and even friends of friends can all be excellent referrals when looking for a mortgage broker.
3. Real Estate Agents
Loan agents witness a lot of loan closings. As a result, they are likely to have several suggestions available when asked about a mortgage broker. Some real estate companies even have their own in-house lenders.
4. Online Mortgage Brokers/Databases
Online mortgage brokers are a huge percentage of today’s mortgage brokerage market. They are an excellent choice for people who prefer to do everything online. However, if you prefer to deal with a person face to face, you can still utilize the online mortgage brokerage databases to find a broker near you. If you are searching for a broker in Ontario, the Financial Services Commission of Ontario has a searchable database of licensed mortgage brokers.
When looking for a mortgage broker, it is important to remember to shop around. Schedule an interview with several different brokers so that you can compare and contrast. During the initial meeting, remember to ask about closing times, requirements (credit score, debt to income ratio, and down payments), rates, and fees. A mortgage broker can be an excellent tool for those looking to get the best possible rate on their mortgage. A fraction of a percent off your mortgage rate can mean an immense amount of overall savings on your mortgage and monthly payments.