What is a Mortgage Broker?

by Catherine Rein
(last updated April 13, 2009)

One of the ways to get a home loan, in addition to banks or credit unions, is through mortgage brokers. The mortgage broker works as the middle person between borrowers and banks or other lending institutions. Your realtor might refer a mortgage broker to you. They may have the best home loan deals since they often work with many different lenders.

Know your credit score before researching home loans. Your credit score will dictate the type of mortgage you might qualify for. If you have a credit score of 620 or lower, it might be wise to wait and try to improve your score before applying for a new home loan. Subprime mortgages or non-conforming loans are the loans given to borrowers with credit scores of 620 or lower. It can more difficult to be approved for any type of loan with a low credit score or you might have to accept a loan with a higher interest rate or additional fees.

If you are in the market for a new home loan, here are some things to consider about using a mortgage broker:

  • When to use a Mortgage Broker. You don't have to use a mortgage broker when shopping for a home loan. You can go directly to a bank or credit union for lending. A mortgage broker may be the best choice if you have less than perfect credit, are self-employed or have recently switched professions, or have a heavy debt load.
  • Mortgage Broker Selection. Finding the right broker for your needs is key to getting the best deal on a home loan. Ask the broker how they are paid, what their training is and how they select the best loan for you. You should choose a broker who is prompt, efficient and knowledgeable about their products. Check their background with the Better Business Bureau or ask for references from former clients.
  • Predatory Lenders. Be on the look out for predatory lenders or mortgage brokers. If the terms of a loan seem particularly demanding or have high fees, the lender could be a predatory lender. These lenders prey on borrowers with less than perfect credit or borrowers new to home buying.

Keep in mind that if you have excellent credit, steady income and low debt loads, it might be cheaper and easier to work directly with a bank for home loan lending. Working with a mortgage broker may include paying additional fees.

Author Bio

Catherine Rein

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