Brokers are
professionals who play an important role in mediating between a
lender and a borrower. Brokers collect personal information about
the client for the lender including employment and medical history.
They also provide the clients' financial and credit information
to the lender.
What Mortgage Brokers Do:
mortgage brokers guide customers through the process of selecting
a suitable mortgage package with competitive package offers. They
also offer financial advice on mortgage and property. Their job
is to find a mortgage package that meets the borrower's needs, and
to help the client process and complete their mortgage application
form. In the United States, mortgage brokers negotiate over 80%
of home loans issued. Banks go through brokers to effectively outsource
the job of finding and qualifying borrowers.
Insurance Brokers:
Most people take out insurance on their homes. Insurance brokers
source contracts of insurance on behalf of their customers. An insurance
broker will help you to choose the best to fit your specific needs
– important as there are many different levels of insurance coverage.
You should always remember though,
while brokers are supposed to help you find the best deal for you
– they work largely on commissions, and so many try and push the
deals that suit them the best. If you’re armed with a solid foundation
of knowledge about mortgages you’ll be able to identify a rogue
broker very quickly.
All in all, a good mortgage broker
really can help to secure a very good mortgage deal for you and
it’s worth finding one if only to talk to.
How To Spot Potentially Bad Brokers/Lenders
In any multi-billion
dollar industry there are sharks looking to prey on the uninformed
and innocent. The mortgage niche can be very confusing to some consumers
and this is why some sharks enter the market to make easy gains
on trusting people.
Despite increasing
mortgage regulations in most countries you still need to be on your
guard. Your mortgage could be the biggest expense of your life so
make sure you’ve researched everything thoroughly before signing
on the dotted line.
Here are a few tips
to help you determine whether the company you are dealing with is
legitimate:
1. Beware if the lender doesn’t give you a
good faith estimate of what the closing cost will be. Under The
Real Estates Settlement Act, a mortgage broker must provide you
with this information within three days once you have applied for
a loan. An honest lender will give this to you without a problem,
as there is nothing to hide. Some of the better brokers will even
give you a good faith estimate on your pre–qualifying information.
Also, watch out for any company that won’t give you information
up front, such as interest rate and other fees.
2. Beware if the lender says it is ok for you
to lie about any information, especially about your income, to increase
your chances of approval. Any sort of lying on any loan form is
classified as fraud and is a criminal act. If a broker is encouraging
you to do such a thing, use your common sense. If the broker gives
you the leeway to do it, then they will probably have no problem
committing fraudulent acts upon you. Of course, there are exceptions
to the rule. Just make sure to ask about this should the situation
arise.
3. Beware of interest rates that are amazingly
low or incredibly high. Low interest rates can be very tempting,
especially when they beat everyone else by two or three percent.
You may think that this will save you money, but in the long run,
it will only cost you more, since most loans with significantly
lower interest rates tend to increase dramatically throughout the
lifetime of the loan. People with a less than perfect credit rating
usually fall victim to high interest rates that range anywhere between
two and three percent higher than everyone else. There are many
places online that offer to check interest rates against your credit
and can give you an accurate estimate of how much you should be
paying. Make sure you are doing your homework.
4. Proceed with caution if you feel
pressured into applying for a mortgage loan that you don’t understand
or can’t financially afford. If you do feel unsure of anything with
the loan, ask your broker to explain it to you in detail, or go
to someone else who you know can trust. If you are being pressured
to go with a certain company for a loan, proceed with caution. Never
take a loan because you feel like you are being forced into it.
When searching for a mortgage,
make sure the contract does not differ from the original contract.
Companies that ask for more signers, credit insurance, or prepayment
penalty fees are probably looking for ways to make money off of
you, and quite honestly, don’t have your best interest in mind.
In this case, you should take your business elsewhere.
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