The mortgage industry is a significant part of the economy of the United States. The national average mortgage two years ago in 2017 was valued at $201,811 and, just a year ago, households in America owed a total of $9.12 trillion in mortgage debt. As one of the most densely populated areas in the country, California has one of the highest average monthly mortgage rates valued at $2,043.
Getting a mortgage approved is not something that you are going to do very often. In most cases, it is a one-off thing, and there are chances that you’ll get a mortgage just once in your life. It is not done every day and will prove to be one of the biggest and most important financial decisions you take in your life.
Most people are not exposed to complex business decisions regularly, and thus do not possess a strategy to follow when choosing the aptest mortgage type or mortgage lender. Searching for the perfect mortgage involves a lot of legwork and will have you searching for the best rates with the best terms, and you will be knocking on a lot of mortgage lenders’ doors to find the perfect one.
Therefore, to avoid all this hassle, and find the right mortgage that suits your needs, it is best to use the services of a mortgage broker.
So, what is a mortgage broker? A mortgage broker can be defined as a middleman, who connects the mortgage buyers with mortgage lenders. Although mortgage brokers are heavily involved in the process, they do not work under the mortgage lenders, and thus do not give out mortgage loans themselves.
When you initiate your relationship with the mortgage broker, they will first analyze your present financial situation, which will include your credit score evaluation, your income review, and other such characteristics that are important. The analysis of your finances is done not only to provide you with information relating to the loans best suited to you but also so that they can apply for a mortgage on your behalf. Thus, a mortgage broker, in essence, also does mortgage shopping for you.
Mortgage workers are not charity workers, so naturally, they require compensation for the time and effort they put in to find the perfect mortgage for you. Mortgage brokers go by two different types of fee schedules – one that is paid by the lender, and the other that is funded by the borrower.
In Los Angeles, there are a large number of mortgage brokers and mortgage lenders ready to offer their services to you, and amongst this plethora of brokers, you can expect all types – the good ones, the average ones, and the bad ones. Hence, as long as you know what to look for in a mortgage broker Los Angeles bound, you’ll have no issues.
To separate the good ones from the bad ones, there are several considerations you should keep in mind:
As mentioned earlier, there are different ways a mortgage is paid, and it is either through you, or the lender. How the mortgage broker is paid can show the potential bias a mortgage broker might have. For instance, if a particular lender pays a mortgage broker for all the mortgages brokered by them, it might be a cause of concern for you.
Although you would be saving on paying the fees to the mortgage broker yourself, there might be a tradeoff here that could prove to be much more expensive in the long run. Since the lender is paying the broker, the broker will be biased towards the hand that feeds them and try to sell you mortgages that might not be best suited to your needs and have unfavorable rates and conditions.
On the other hand, mortgage brokers also make their earnings through the origination fee (that usually is one percent of the total loan, but the percentage can vary) that is paid for by the mortgage buyers. This payment is a commission, which means the higher the loan, the higher the commission for the broker. Thus, the brokers here can try to make you get higher loans than you require to boost their earnings. It would help if you kept this in mind when searching for the perfect mortgage broker.
The best and most effective advertisement is through word of mouth, and that is due to a crucial factor – it is not paid for. Through word of mouth, you get honest opinions and feedback, which can help you find the best of the best. You can take advice from friends or family that have recently used a mortgage broker, or you can go online and go through the reviews of the different brokers online.
Just like the majority of industries, the advent of the internet has also changed the industries of mortgage and real estate significantly – both in positive and negative manners.
An online search can potentially find the perfect mortgage broker for your needs. All the information regarding the broker, how they work, what they do, and their specialization, etc., can be found on their websites. You can also read the reviews of the previous clientele. But a common mistake that online users make is to believe that mortgage calculators available online are a hundred percent accurate.
It is imperative to analyze the set and number of lenders that the mortgage broker works with to gauge the effectiveness of using the services of that particular broker. If the mortgage broker is working with a limited set of lenders, it might not be suitable or effective for you to utilize the services of that mortgage broker and incur the cost of doing so. This is because you do not get much choice and you can do the same by searching for brokers yourself.
Additionally, since the mortgage broker does not have many options when it comes to the lenders, they might get influenced by the lenders and become biased towards them, which will not be a suitable situation for you. Using a mortgage broker only makes sense if they have a large pool of mortgage lenders on their panel, and you are presented with various options of loans and loan lenders when you utilize the services of the mortgage broker.
Experience matters. The more experience of a service provider in any field, the more chances that the service will be excellent, and you will be satisfied with the service being provided. So on the quest to find the best broker, you should also take their experience into account.
What other things should you keep in mind when looking for a mortgage broker? Let us know in the comments below!