LOS ANGELES, CA — One of the biggest financial decisions that anyone can make in life is to purchase a home and it is one that is often fraught with hidden perils and dangers for first-time homebuyers.
According to the Local Records Office in Bellflower, CA among all of the various expenses that one can rack up while buying a new home, the choice to employ a mortgage broker in order to help facilitate the process of acquiring a home loan is one that often comes with the most questions and considerations outside of the home itself.
A regulated profession that is often considered a necessity to facilitate some of the more competitive bids out there, mortgage brokers are, nonetheless, a major expense that should come with a better explanation as to who they are and what services they provide.
What a Mortgage Broker Is
In this article, the Local Records Office will discuss what a mortgage broker is, what he does, and the many different ways he can get paid. Hopefully, this will give you a clearer idea of the role of a mortgage broker as well as arm you with the knowledge necessary to make the best decisions for your circumstances.
In its most basic sense, a mortgage broker helps expand your options for a home loan. Let’s explain in more detail. For example, when you go to a bank, you will only have a selection of mortgages on offer by that bank.
Their terms may not suit your financial situation, among other things. Nonetheless, if you want mortgages from that bank you are somewhat constrained by their options.
If you approach a mortgage broker, however, you can tell the broker what you’re looking for and he can approach multiple institutions looking for a loan package that suits your needs. The major benefit of this, aside from options, is that a mortgage broker could pay for himself simply by finding you a very competitive low-rate home loan.
The idea here is that a mortgage broker can do a better job than you can at finding the loan you want. The value of this job depends on how well you convey your needs and how good your broker is at matching them up with available financial instruments on the market.
How to Choose a Mortgage Broker
When it comes to whether or not you should choose a mortgage broker the matter becomes one of sophistication and time. Are you sophisticated enough to navigate the sea of mortgage products out there? And do you have the time to do this efficiently?
For most people, the answer to these questions is a definite “No” and hence a mortgage broker more than pays for himself if the job is done well.
How exactly are mortgage brokers paid? Through, a variety of means that the Local Records Office will go over here. First, a couple of things we need to get out of the way. Mortgage brokers are licensed and their profession is regulated. That said, they do not draw a paycheck from a banking institution.
In most cases, mortgage brokers operate independently or with a company dedicated to that service. Like any other profession out there, they often charge a fee for their service. Here, there is a lot of variance in how the broker is paid. The fee could be paid by the borrower or the lender and is usually a small percentage of the total amount.
A broker’s fee can often be rolled into the full loan amount or paid separately. For many potential homebuyers, this fee isn’t small and adds to the already high costs of buying a home.
To alleviate buyer anxiety over fees and fears over other “hidden” costs, mortgage brokers are required to itemize expenses and present them in a clear and understandable way.
At its core, the goal of this simplified process is to avoid bad practices and shady dealings on the part of mortgage brokers as well as give consumers the knowledge to enter into agreements that they can handle. While misgivings about the mortgage broker process might be understandable, they are a largely regulated field since the passage of the Dodd-Frank Act.
Before the Dodd-Frank Act, mortgage brokers were allowed to engage in some fairly questionable practices that may have fairly given some people the wrong impression of the role they play in purchasing a home.
According to the Local Records Office, prior to this act, mortgage brokers could be incentivized to put forward loans that were financially unsustainable for the borrower yet rewarded the broker with high fees for signing up people to high-interest-bearing home loans.
Mortgage Broker Disasters
Not only is this a disaster for all involved, but also it is not sustainable in the long run. It is perhaps this existential threat posed by less-than-ethical brokers that caused the most calls for change in home lending in decades. Now, since the Dodd-Frank Act, mortgage brokers can no longer make huge commissions off of these types of loans.
The act also stipulates that there can’t be any hidden fees attached to the loan, the mortgage broker’s compensation cannot be tied to the interest rate that you pay as a borrower, they cannot be compensated for pushing affiliated businesses, and usually cannot charge a fee to both the lender and the borrower.
Excluding any costs you might be charged upfront, mortgage brokers cannot assess a fee unless the deal is closed. Given these restrictions on the profession and the much more stringent monitoring of licensure procedures, working with a mortgage broker is easier than ever before.
The Local Records Office suggests that in order for another mortgage broker disaster to happen a good idea is to invest in Los Angeles’s booming real estate. Local Records Office urges investors to invest in Los Angeles rental real estate because of the fast growth.
Mortgage Brokers and Navigating a Financed Home
Not only can they help homebuyers navigate the changing and murky waters of financing a home, but also they can save a borrower considerable sum of money with a competitive loan at a great rate.
The choice to employ one might be either one of circumstance or totally voluntary, but the rules and regulations established around the profession ensure that borrowers are as protected as they can be from unscrupulous brokers and unsustainable financial situations.
The goal, after all, is to get you into a home and, eventually, a stable financial situation with which to build a bright and secure future.