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Even if your IQ is through the roof, mortgages can make your head hurt. Its just plain hard to wrap your brain around what all theterms meanpoints,APR,APYnot to mention crunching the numbers, shopping around, and filling out reams of paperwork. On the other hand, new products such as Quicken LoansRocket Mortgage appclaim to make getting a mortgage about as easy as ordering a pizza.
So can you really just go it alone, or do you need reinforcements?
Many people turn to mortgage brokers for help. These professionals act as the intermediary between you and the bank, playing matchmaker for you and your ideal home loan. This sounds great, but brokers arent for everyone. Here are the top pros and cons to consider.
Many home buyers get their loan straight from a bank, perhaps one where they already have a checking account. Which is fine, but know this: Lenders only offer their product, says mortgage brokerKen CrichlowofFirst Rate Fundingin Albany, NY. Even Quickens Rocket Mortgage, for all its speed, offers only Quicken loans, which is a bit narrow to say the least.
Brokers, by contrast, can present you withallyour loan options, from a variety of lenders. And since shopping around is key to finding the best deal, odds are a broker will deliver a more ideal loan than one bank or app ever could.
Landing a loan will cost youin fees: appraisal feels, origination fees, application fees. The list goes on and on. Savvy mortgage brokers should be able to get some of those added costs waived. The catch?They may still charge a fee of their own. The brokers fee is paid by either the lender or, in most cases, youoften 1% to 2%of the total of the loan. Whether its added to the loan or paid upfront, it can be a hefty chunk of change.So be sure to ask your broker what he chargesand weigh that against the benefits.
Yes, you can compare multiple lenders on your own, but thats a time-consuming propositionone that brokers can take off your shoulders and manage with ease. They can fill out your paperwork, tell you where to sign, and handle all the negotiations with lenders. Whats more, many have relationships with certain banks that enable them to speed up the whole process. So, if youre in a rush or short on time, using a broker is akin to hitting the accelerator and having your own Uber driver combined.
While mortgage brokers are independent from banks, that doesnt mean they dont have their biases. For instance, some unscrupulous brokers may have a long history of dealing with certain lenders, and favor them at your expense. Or, in some cases a lender may pay their fee, rather than you. That sounds greatunless that lenders loan has undesirable terms. So be sure to ask your brokerhowmuch he gets paid as well as bywhom,so you know the deal.
Should you get a fixed or an adjustable interest rate? A 15- or 30-year loan? That will depend on many variables, from your income to your credit score to how long you plan to stay in the home. Brokers can help you weigh your options and find a loan thats right not just for any old home buyer, butyou.
Brokers can look at your specific characteristics and match your application to the best lender given your circumstances, says Crichlow. This can particularly come in handy if youre a less-than-ideal or abnormal candidate.
Are you receiving a large cash gift for the down payment, starting a new job, or making a large purchase? All of these can be hurdles to conquer, and warning signs for a bank, if not handled properly. Or, if youre struggling with poor credit or eager to take advantage of a federal program like FHA or USDA home loans, you might struggle to find a lender that offers those directly to consumers. Thats where brokers can step in and pave the way, and continue offering support right on up to the day you close.
So if the very idea of getting a mortgage makes your blood pressure rise, the extra attention could be worth every penny.
For more smart financial news and advice, head over toMarketWatch.
Jamie Wiebe writes about home design and real estate for m. She has previously written for House Beautiful, Elle Decor, Real Simple, Veranda, and more.
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