Mortgage brokers and mortgage lenders often get confused as the same entity; they are not. The mortgage lender is the financial institution that approves the amount of financing and lends funds with the expectation of repayment. It is wise to shop around before committing to a lender, which is where the mortgage broker comes in.

The mortgage broker is an advocate who acts as an intermediary between the borrower and various lenders. They shop around on the borrower’s behalf to minimize the hassle of going back and forth from one lender to another. The mortgage broker’s function is to educate you, advocate for you, and find the best loan option.

There are four questions your mortgage broker should answer explicitly:

Who pays the broker fee?
What is the best interest rate?
What are the down payment options?
What are the closing costs?

Who pays the broker fee?

It’s important to ask upfront who pays your mortgage broker’s fees. Many mortgage lenders will pay the broker fees, but that can create a conflict of interest. The broker might charge you directly for their fee. Ask exactly how much the broker’s commission is and who is responsible for payment.

What is the best interest rate?

Ask your broker about the best interest rate for your situation. Your rate will depend on your debt-to-income ratio, loan repayment history, factors surrounding the property you’re seeking, and credit factors. The mortgage balance, loan term, and interest rates for which you qualify will determine your monthly payment. Ask questions until you are absolutely positive you understand your exact APR, do not accept a guesstimate.

What are the down payment options?

The down payment is the cash you will need to pay upfront to purchase a property. While lenders prefer a 20 percent down payment, different loan types and programs are available to help lower the cost. Your broker should be willing and able to explain every option and scenario.

What are the closing costs?

There are multiple fees involved in the home-buying process. Each lender may charge different amounts, which will affect how much money you need to bring to closing. Ask your mortgage broker about fees for things like inspection reports, credit reports, origination fees, the appraisal, home inspection, and titling. The broker should compare fee structures between lenders to help you find the one that best meets your needs.

A mortgage loan is usually the most significant purchase in one’s life, and it’s essential to have an advocate that you can trust. The mortgage broker you choose should be your guide to navigate through the various lending scenarios and find you the best possible option. They should be knowledgeable, patient, and willing to work diligently on your behalf.

If you would like more information about buying a home, or if you’re looking for a great REALTOR® to show you around the Reno-Sparks area, contact the David Morris Group. We’re happy to be your helpful guide. Give us a call at (775) 828-3292.