Mortgage Broker Training Overview
It used to be that banks and other lending institutions market their products, including mortgages, directly to prospective clients. However, with the industry becoming bigger, competition has also become stiffer. Thus, there has been an increased demand for the services of a mortgage broker in the recent years.
In fact, a study revealed that in 2004 there were around 53,000 mortgage brokerage companies in the U.S. and that 68 percent of all residential loans were processed using these companies. Because of the important role that mortgage broker industry is playing, it is being regulated through federal laws, enforcement agencies and licensing boards.
Differentiating a mortgage broker from a mortgage lender
Some people get confused in distinguishing a mortgage broker from a mortgage lender. The differences between a mortgage broker from a lender are as follows:
A broker works as an intermediary or a conduit between the home buyer and lender while the lender works directly with the lending institution.
Most states require a broker to be registered and license, while the lender works under the license of their company.
A mortgage broker may works independently or with a firm, a mortgage lender always work with a financial institution.
A mortgage broker does not loan the money, he assists the borrower to find a mortgage lender that can loan him the money.
The broker handles the transaction prior to the loan approval; the lender approves the loan and handles the actual disbursement.
Brokers earns commissions for bringing clients to the lender, the lender earns from interest of the loan.
Scope of the mortgage broker’s job
Mortgage brokers are professionals who act as intermediary between a mortgage borrower and a mortgage lender, bring them together and work with them until the deal is closed. This may sound simple, but in reality the process involves a lot of negotiating, transacting, and accomplishing many documentary requirements before the work of mortgage broker is done.
Specifically, a mortgage broker does any or all of the following:
The mortgage broker finds a prospective home buyer, find out his specific requirements and evaluate his credit standing.
He then offers the loan products of several lenders to the prospective home buyer. With his network of mortgage lenders, he is able to refer the lenders that match the requirements of the borrower. For example, a home buyer has a problem with his credit standing; the mortgage broker can find him a lender that can accommodate this buyer.
The mortgage broker assists the borrower in submitting his application and other requirements such as credit documents, income and employment records and property appraisal.
Advantages and disadvantages of using a mortgage broker
Some prospective home buyers have second thoughts about getting a mortgage broker because of the notion that the fee could be high. Others feel that they can coordinate directly with a lender and complete the process without the assistance of an intermediary.
However, getting the services of a mortgage broker has the following advantages:
The mortgage broker can give an initial evaluation of the borrower’s financial and other credit documents and give the borrower advice and assistance on possible problem areas that can affect his application for a loan.
The mortgage broker usually has connections with several lending institutions so the borrower does not have to look for a lender, the mortgage broker will help him find one.
The mortgage broker can help the borrower find the lending institution that offers the best term for his mortgage loan.
Because the mortgage broker knows the industry, he is able to make the process less complicated for the borrower, especially for those who have some credit problems.
Engaging the services of a mortgage broker will make the whole loan process fast and convenient.
Using the services of a mortgage broker in getting a loan also has some disadvantages. These include:
The borrower could end up paying more if he will not carefully scrutinize the fees and rates being charged by the mortgage broker.
Some mortgage brokers favor certain lenders even they do not give the best rates. The borrower should therefore ask around before committing to a particular broker.
Finding a good mortgage broker
A prospective home buyer will depend a lot on the mortgage broker for his mortgage loan. The broker will act as the borrower’s adviser and loan expert, thus broker should make sure that the borrower understands the terms of the loan, its features and the specific fees and charges.
To be able to secure the best mortgage, a prospective home buyer should be able to find a good mortgage broker. Here are some tips to help you find a good broker:
The mortgage broker should be accredited and licensed.
The broker should be able to explain and justify his recommendation for a particular lender.
The broker should belong to a reputable association in the mortgage brokerage industry.
The broker should have a wide network of lending institutions.
The broker should disclose all fees, charges and commissions to the borrower.
After considering the essential qualities of a good mortgage broker, a prospective house buyer can start choosing which mortgage brokerage firm to use. There are a lot of choices so you can start by asking around or checking their websites in the internet. Read the reviews and find the services they offer.
Make sure that your broker will find you a mortgage lender that is insured with the FHA or the Federal Housing Administration. This was created in 1934 to provide assistance to those planning to buy a house by insuring mortgages. The FHA mortgage insurance protects lenders against loss should a homebuyer defaults on his loan. Also check if the chosen lender allows refinancing.
Only after considering the different aspects of the mortgage should a borrower start finalizing his deal with a mortgage broker. This is to ensure that he gets a fair and reasonable deal for that very important investment which is his house.