When it comes to buying a home, you may come across a mortgage broker or a loan broker. While they can be helpful in finding the right loan for you, there are some potential drawbacks to consider. Not all lenders work with brokers, so you may miss out on some loan options that would be right for you. Additionally, you may have to pay a brokerage fee in addition to standard mortgage expenses such as opening fees, closing costs, appraisal, and title fee.
It's not uncommon for different lenders to offer different mortgage rates. However, if one lender offers a significantly lower rate than the competition, it's likely that there is some kind of problem. You may have to pay points in advance to get that rate or be charged higher closing costs on your loan. Be wary of any rate that seems too good to be true.
The Dodd-Frank Act prohibits mortgage brokers from charging hidden fees or basing their compensation on the borrower's interest rate. Some real estate companies offer an in-house mortgage broker as part of their services, but you are not required to use them. The best way to find a mortgage broker is through referrals from family, friends, and your real estate agent. Once you find the right lender and loan for you, your mortgage broker will work with the bank's insurance department, the closing agent (usually the title company), and your real estate agent to make sure the transaction runs smoothly until closing day.
If you want a mortgage broker to look at lender options and do much of the work for you, it may be worth the cost. However, it's important that you do your own research and calculations to make sure you're getting the best deal possible. When choosing a mortgage broker, make sure they provide value and that you understand all of the costs associated with your loan. Following this advice can help you find the right mortgage broker for your needs.