A mortgage broker is someone who brings borrowers and lenders together, but does not originate mortgages. A broker connects the borrowers with lenders that are the best fit for the borrower's financial situation and interest-rate needs. The mortgage broker is also responsible for gathering the paperwork from the borrower to send to the mortgage lender for underwriting and approval.
A mortgage broker works on a borrower’s behalf to find the lowest available mortgage rates and/or the best loan programs available through multiple lenders. In contrast, a loan officer at a bank offers programs and mortgage rates from their institution, which may not be the best fit for the borrower.
Mortgage brokers get paid commision by the lender and operate independently from mortgage lenders and banks. The commision they charge is either paid by you, the borrower or the lender. The commision is generally a small percentage of the loan amount, generally 1% and 2%.
Length of time you plan to keep the property. It's important to consider how long you intend to keep your home or property to determine if it's more economical to buy or rent, which can vary dramatically by locality.
Job security. If your job may require you to relocate, you are considering getting a new job in a different city or, even worse, you are at risk of losing your current job, getting a home loan may not be in your best interest. Lenders typically like to see two years of job history, though that isn’t always necessary if you have changed jobs within the same field.
Down payment. The Federal Housing Administration offers loans with down payments as little as 3 percent, but by putting down less than 20%, you'll have to pay for private mortgage insurance every month, which could dramatically increase your monthly mortgage payment. Aside from interest rates, it's important to know how much you have for a down payment and how much monhly mortgage expense you can afford before getting a home loan.
Emotional readiness. Home ownership is not for everyone. If you're uncertain about whether you want to stay in the same location or travel the world, owning a home might not be in your best interest. It's also important to factor in the additional responsibilities that come with home ownership. If something breaks and needs to be fixed, it's no longer the responsibility of your landlord, which can be a diffcult transition for new homeowners.
Financial security. Having a reliable source of income, good credit and additional money stashed away, aside from your down payment, are all important things to consider before purchasing a home. All of those factors can significantly impact your home buying experience. It's easy to forget that all homes, even brand new ones, require upkeep and yes, things do suddenly break for no reason.
Your local housing market. Depending on where you live. buying a home may be less expensive than renting, but that's not the case in all cities. Doing your own market research for where you currently live or where you plan to may help you determine what is best. Also, since purchasing is a home is generally a long-term decision, you want to ensure you're not making too many sacrifices to afford the home you want or your desired type of home is in short supply. Be patient and vigilant.
Pre-approval can be a good idea, so that you and your broker can be better prepard for when it's time to begin the closing process. It can make the loan process smoother and can also help you know what is in your price range when purchasing a home. Pre-approvals usually last for a set set period of time-- commonly 60 days. Once, that time has lapsed your broker will need to renew it with new documents or start the process over. Additionally, if the appraisal for your desired property comes back lower than anticipated, the lender may decide to not fund your loan, despite being pre-approved. Keep in mind that any changes to your financial situation between pre-approval and formal approval, could prevent the bank from funding your loan. It's important that you work closely with your broker throughout this process to help prevent any unexpected issues from coming up that may push back your closing or prevent you from closing on your home.
Your credit history and credit score ultimately impact the type of home loan you may qualify for and the interest rate/terms of your loan. Generally speaking, a bad credit score doesn't prevent you from being able to qualify for a home loan, but it can dramatically impact the terms of your loan somtimes resulting in higher interest rates, less flexibility and the additional expense for mortgage insurance.
Three days prior to closing you'll receive the closing disclosure, which outlines the terms of your home loan; closing costs; and any outstanding charges or fees. It's important for you to review the disclosure, sign it and return it to your broker quickly, since there's a mandatory three day waiting period after the signed disclosure is received by your broker before the official closing can take place.
You should also anticipate doing a final walk-through before closing to ensure that any repairs previously agreed upon have been made, the seller has completely vacated the property and everything is as you expected. It's common that when purchasing a home, the contract allows you to do a final inspection of the property 24 hours before closing,
Be prepared for unxpected things to come up in the final days before closing and ensure that you are staying in contact with your broker to prevent anything from delaying you being able to close on your loan.