Becoming a homeowner is a big part of the American Dream for many people. Last year, 65% of Americans owned their own home.
Buying a house is likely to be the biggest, and most stressful, financial commitment you will make in your lifetime.
Applying for a mortgage can be time-consuming and daunting, especially for first-time buyers.
A mortgage consultant also referred to as a mortgage broker, can help you avoid some common pitfalls in the house buying process and help you find competitive rates and negotiate terms.
A complete guide to using a mortgage consultant
We cover what a broker does, the benefits of using one, and the things you need to consider before using one.
What does a mortgage consultant do?
A mortgage broker’s job is to find the right mortgage deal for you based on your needs and circumstances.
Here’s how they do it:
1. Assess your requirements: before a broker can start finding you mortgage deals, they need to know what your requirements are and your current financial situation.
You will be asked to provide information such as your monthly income and credit history, as well as how much you can afford as part of your monthly budget.
2. Make recommendations: once the mortgage consultant understands your situation, they will then search the market and their vast network to find suitable lenders that match your criteria.
3. Process the application: after the available lenders have been shortlisted, you can decide which one you’d like to go with. The broker will then start the mortgage application process by compiling all of the paperwork such as bank statements, credit reports and employment history.
The broker will act as a middle-man between the lender and you to process the application.
A mortgage consultant will base their mortgage recommendations on the following factors:
- How much deposit you have.
- Your monthly repayment budget.
- Current market interest rates.
- Your credit history and outgoings.
The two types of mortgage brokers
Tied or multi-tied mortgage consultants: these are tied to one lender or a group of lenders.
This type of broker can limit your offers, however, they can also offer you exclusive deals or incentives.
Whole of market brokers: independent mortgage advisors who don’t have any links to specific lenders, giving you a much wider network of mortgage options to choose from.
The benefits of using a mortgage broker
Saves you time: mortgage consultants have access to all of the deals available to you at the touch of a button, which means you won’t have to spend hours trawling the internet or phoning leaders to find out what they can offer.
Simplifies the process: applying for a mortgage can require a lot of work if you are not an expert in the field.
Mortgage advisors are technically a form of financial advisors, which means they must have the relevant qualifications to give you advice.
Protects your interests and situation: mortgage brokers have a duty of care to recommend the most suitable and affordable mortgage.
If a mortgage that you take out via a broker isn’t right for you after you’ve signed the paperwork, you can complain and seek compensation.
If you took out a mortgage based on your own research, you’re not protected if you find out that it wasn’t the right deal for you at a later date.
Gives you value for money: one of the biggest benefits of using a mortgage broker is that they often have access to deals that aren’t available on the market. Getting a good deal on your mortgage isn’t just about the interest rate.
A skilled mortgage broker will take into account the other fees that apply and work out which is the best deal overall.
The average mortgage debt in America is over $215,000, so it’s important to get the best deal possible.
Improves your chances of being accepted: mortgage consultants communicate with a network of lenders daily, making them experts at knowing who is more likely to approve your application and what information they will need to see.
Offers you advice on other financial decisions: when you become a homeowner other financial commitments need to be made to protect your new asset.
These include buildings and contents insurance, life insurance and payment protection. A mortgage consultant can recommend insurances to protect you financially in the event of redundancy, a critical illness or death.
Does a mortgage broker charge a fee?
Brokers are either compensated through fees paid by the borrower or fees paid by lenders.
The amount will vary depending on the broker, but they will typically earn a commission of 2.25% for each loan. The amount they can charge cannot be higher than 3% of the loan value.
Borrower fees: these are paid by the borrower and can either be paid as a lump sum or sometimes added to the total loan amount.
Lender commissions: the amount paid by the lender depends on the loan value. Be mindful that lenders will often pass on these costs to the borrower by adding them to the total cost of the loan.
Ask to see the loan breakdown and discuss each fee with the broker before applying for a loan.
Is it better to use a mortgage broker or a bank?
If you want to find the best deals available in the market, a broker has lots of connections that they can use to get you the most competitive mortgage rate.
- These are the reasons people choose to use a broker rather than a bank:
- Access to a wider range of products and services
- Mortgage consultants can negotiate deals on your behalf.
- Brokers can help you complete the vast amount of paperwork required as part of your application.
- They can provide bespoke advice tailored to your needs and financial situation.
- If you have a bad credit history, a consultant can make the difference between getting your mortgage approved rather than declined.
How do I find a mortgage consultant?
The most reliable way to find a good mortgage consultant is through referrals from friends, family or real estate agents.
Check out online reviews to get some honest feedback from customers and check the company with Better Business Bureau before using.
Do your research online to find out more about the lender’s processes and values. You must be comfortable doing business with them because it’s a big financial commitment to take out a mortgage.
You can also search for a company on nmlsconsumeraccess.org to find out whether it’s registered in the state in which you’re buying your home.
What makes a successful mortgage broker?
A good mortgage consultant will:
- Communicate with you regularly.
- Give you a clear vision that includes the next steps and how to meet your requirements.
- Be positive about the process.
- Go the extra mile to ensure the application is seamless.
- Be adaptable to changing circumstances and the market.
- Ask the right questions.
- Chase up an application on your behalf.
- Follow up with you after the completion of your mortgage application.
- Be detail-oriented and organized.
What to look for in a mortgage deal
Once the mortgage consultant has put together a shortlist of mortgage deals, they will talk you through the pros and cons of each deal.
Consider the following before making a decision:
- If you want a fixed-rate, discount or tracker mortgage.
- How much the mortgage fees are.
- Whether the mortgage offer includes incentives or cashback.
Things to consider before using a mortgage consultant
- What are the broker’s fees and how will they get paid?
- What lenders does the broker work with? The bigger their network, the more choices you will have.
- The broker may be biased towards certain lenders that they have a good relationship with.
- Is their communication responsive? The housing market moves extremely quickly and you want your consultant to do the same.
- What services are they going to provide you with? It’s best to know upfront if they will be completing the loan paperwork or if you will be expected to do it.
- What is the lender’s typical turnaround time for each stage of the process?
- What is the broker’s reputation? Do they have a good track record and customer satisfaction rate? Consider asking for references before making your decision.
Make the right financial decision for you
Choosing the right mortgage loan is important. There is no right or wrong way to get a mortgage, however, a mortgage consultant can make sure the process is as seamless as possible and that you get the right deal.If you’re currently saving to buy a home, visit our blog for the latest saving and personal financial advice.