Mortgage brokers can be incredibly helpful when it comes to identifying the best home loans for their clients. As the middleman between lenders and borrowers, a mortgage broker can offer clients a variety of options when choosing a rate and a lender. The broker will either be paid by you, or the lender as a percentage of the loan amount (typically between 1-2%).
So the question stands — why use a broker then? The short answer is, they have access to better rates. Brokers are able to show you what your interest rate options are, in addition to helping you navigate all your options.
Whether this is your first mortgage or you’re refinancing like a pro, these three basic questions will help set the precedent for your experience. Let’s dive in!
Question #1: What type of mortgage is right for me?
Think of mortgage types like cars. They all serve the purpose of driving and will get you to the same place but depending on the car, the ride is different. The best way to determine what mortgage is right for is by giving the broker a good understanding of your financial situation. For example, someone who is looking to minimize interest and pay their mortgage faster might be better off with a 15 year mortgage. However if you’re planning on selling your home in a few years, that might not be the best option. Your broker may also recommend FHA loans if you’re facing credit challenges or have a smaller down payment. A good broker will be able to align your mortgage with your short term and long term goals.
Question #2: How much will the mortgage cost?
Mortgage brokers are required to show you their fees up front, and can’t charge you any more than the stated amount. We advise you to pay close attention to the interest rate of your loan, and any other costs charged by the lender. Your next step is to compare these numbers with all other costs of a mortgage from several lenders.
In order for the mortgage broker to give you a solid loan estimate, they’ll need a few bits of information including social security number, income, property address, etc. The more information you can provide, the better estimates you’ll get. With your estimate, you can expect to get a breakdown of the interest rate, closing costs, taxes and insurance, etc. Based on those numbers, you’ll get a better gauge on how that fits into your budget. If you’re still struggling to bring the amount down, ask your broker about other options like FHA loans or first time homebuyer programs.
Question #3: Should I make a big down payment or use buy points?
There are pros and cons to each option. The general rule of thumb is to never drain all your savings, even for a house! Most experts will tell you to always make sure you have 3-6 months worth of emergency savings. In other words, you should probably incorporate your upcoming mortgage payment into those funds.
As we stated before, the best way for your mortgage broker to help you is making sure you provide adequate, detailed information like where you’re looking to invest your money, what your future plans are, etc. That way they can create a better strategy for you.
When the time comes, we are here to help! We have over 30 years of experience in the mortgage loan business. We are locally owned and operated too, which means we don’t have the overhead of national firms! This allows us, in most cases, to save you money. And because we are the lender, it allows us to close your loan faster. Please call us at 443-471-4310 to start your loan today, or contact us online. You can also visit our mortgage FAQ page for additional info!