What Does a Mortgage Broker Do? It's Complicated.

Mortgage brokers play a vital role in the home buying process and should have professional liability in place.

Purchasing a new house is one of the most complex events in a person’s life. Properties vary greatly when it comes to style, amenities, school district, and, needless to say, the always important “location, location, location.”

The mortgage application process is a complicated facet of the home buying process, specifically for those without experience. This is where mortgage brokers come in.

What does a mortgage broker do?

A mortgage broker:

Serves because the middleman between the lender and the borrower handles the time-consuming procedure for securing the loan and gathering the considerable paperwork involved.

Compiles all the mandatory paperwork, including credit reports, bank statements, and employment history for borrowers purchasing or refinancing a property.

Has the capacity to anticipate problems that can surface during the applying process.

Can decide which issues might create difficulties with one lender versus another.

Why some buyers avoid mortgage brokers

Sometimes homebuyers feel much more comfortable going right to a huge bank to secure their loan. Because of the case, buyers should at least talk to a broker to understand their loan options and the available rate. Also, First Time Buyer Mortgage Broker are versatile and work with attorneys, underwriters, title companies, and even the sellers’realtor before the keys to the front door are handed over.

In some instances, buyers avoid mortgage brokers simply because they believe they will shoulder the cost of brokers’services themselves. However, the lender pays the commission to the broker at closing, which will be customarily 1–2% of the loan quantity. A somewhat small fee, often called a loan origination fee, is paid by the borrower to the broker. However, this fee may be rolled into the loan amount or paid separately – and sometimes it’s waived as an incentive to borrowers to make use of that broker’s service.

It’s vital that you be diligent when hiring any professional, including a mortgage broker. Some brokers are driven solely to close as many loans that you can, thus compromising service and/or ethics to seal each deal. A mortgage broker will also not have the maximum amount of control over your loan as a huge bank that underwrites the loan in-house.

How do borrowers capitalize on the benefits of a mortgage broker while also protecting themselves?

Borrowers should:

Seek referrals from friends, family, and colleagues and check brokers’references, if available.

Ensure the broker has passed the national exam and the exam within their state.

Ask brokers which kinds of lenders they deal with. Simply by stating they work with AAA-rated lenders, local credit unions, or secondary market lenders such as FNMA and GNMA, brokers will signal to the borrower whether they’re an excellent match.

Inquire if the broker has professional liability insurance in place.

The importance of professional liability insurance

Successful mortgage brokers who have been around in business for numerous years often carry professional liability insurance, which will protect them from claims of negligence. At the same time, they perform professional services during the procedure of originating and closing a loan. Samples of allegations that may be brought contrary to the broker include mishandling the borrower’s documents, discriminating against a potential borrower, or failing to safeguard a borrower’s information. Additionally, mortgage brokers may be drawn into lawsuits because of errors created by a realtor or title agent throughout the closing process. Even although mortgage broker isn’t liable, professional liability insurance would provide coverage for the ensuing defense costs.

The housing crisis hurt the mortgage brokerage industry’s standing, but with increased regulation and scrutiny, it has made a comeback. More than 400,000 federally registered mortgage loan originators are based on the NMLS Mortgage Industry Report, all ready and waiting to offer their valuable service to those making the most crucial purchase of their life.