Written by Guest | Last Updated February 24th, 2020Our goal here at BestCompany.com is to provide you with the honest, reliable information you need to find companies you can trust.
Guest Post by Eric Weisbrot
If you’re in the market to purchase a home, it’s highly likely that getting a mortgage is on your radar. Many consumers utilize the financial institutions where they bank to get a home loan, but there is another option. A mortgage broker or mortgage lender may not be tied to a certain bank or credit union, and they offer some unique benefits to homebuyers.
A licensed mortgage broker acts as an intermediary between homebuyers and home lenders. Brokers take a close look at what the buyers can afford for their new home purchase, and they work with several different lenders to find the best-fit mortgage for the situation.
Using a mortgage broker to get access to various lenders is helpful to many, but there are certain questions to ask before doing so.
Ask about their experience and licensing
1. How long have you been in business?
Whether you are working directly with a mortgage lender or leaning on the expertise of a mortgage broker, it is crucial to know their level of experience in helping homebuyers. The more experience brokers or lenders have, the better chance they will have the right knowledge to get you the best mortgage possible.
A less experienced broker or lender does not necessarily mean you should work with someone else, but it does place more importance on getting answers to the following questions.
2. Are you a licensed mortgage broker?
Every professional working in the home loan business, including lenders and brokers, are required to hold a license. This is an essential part of becoming a mortgage broker, and it ensures that they are working in-line with state and federal rules and regulations. Ask your broker if he or she is licensed, and follow up by searching for their name or business entity online.
3. Do you have a mortgage broker bond?
Part of the licensing process for a mortgage professional is securing a surety bond. This type of protection helps safeguard you as the customer from bad business practices that may lead to damages. A mortgage broker bond pays for claims up to a certain amount, giving you as the homebuyer some peace of mind. Simply ask your broker or lender if they have a bond in place, and ask to see the certificate if so.
4. Can I see business references?
Business references may seem like a thing of the past given the influx of online resources and professional profiles. However, asking for client references should still be a part of the evaluation process when selecting a mortgage broker or lender. Request two or three references and follow up with them to ask about their experience, pros and cons of working with a specific broker.
Ask about your loan options
5. How many lenders do I have access to?
Once you’ve made it through the questions regarding a broker’s experience, your next step is to dive deeper into what they can offer you in terms of a home loan. Mortgage brokers often work with several different lenders, giving you the best chance of getting a mortgage that suits your needs. Ask your broker how many lenders are in his or her reach, and what the relationship is between each home loan company and the broker.
6. What is the APR and interest rate?
Part of the cost of buying a home is determined by your mortgage loan specifics. This includes the annual percentage rate (APR) and the interest rate charged on the loan. Most homebuyers focus only on the interest rate, but the APR actually makes a significant difference in how much you pay. This is a complex calculation that includes interest charges as well as the other fees on the loan. You should ask your broker or lender what the APR is, in addition to the interest rate.
7. What type of mortgage is best?
One of the benefits of working with a mortgage broker is the fact that he or she is well-versed in the mortgage options available to certain borrowers. In some cases, a fixed-rate mortgage, also known as a conventional mortgage, is the best choice; for others, an adjustable-rate mortgage (ARM) may be more suitable. Ask your broker what is the most appropriate for you and your home buying needs.
8. Is there a rate lock?
Buying a home can take time, and the housing market can change swiftly while you’re shopping for a home. A mortgage rate lock is an arrangement between you and the mortgage broker or lender to set the interest rate on a new mortgage application for a set period. If interest rates go up, your specific rate is already locked in. Brokers may or may not offer rate lock, and there may be fees associated with them if they do. Be sure to ask ahead of time.
9. Can I see the loan estimate?
Mortgage lenders are required to provide you with a loan estimate containing all the expenses associated with your home purchase. Once an application is submitted and approved, a loan estimate should be available shortly after. Be sure to ask your broker if this is something they provide or if it comes directly from the lender.
10. Do you guarantee closing?
Until you sign all the required paperwork to purchase and finance your home, the keys cannot be put in your hands. This final paperwork process, known as closing on the home, can be a stressful one, especially when the closing date is pushed back or there are other delays in getting you into your home. Ask your broker if they offer some type of guarantee for on-time closings. Having this guarantee that closing will not be delayed past the set date will ultimately save you time, frustration, and money.
Using a mortgage broker to access lenders can be a smart strategy in getting the best home loan for your purchase. However, it is essential to ask these questions before working with a broker to ensure a successful home buying process.
Eric Weisbrot is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry under several different roles within the company, he is also a contributing author to the surety bond blog.