Frequently Asked Questions on Mortgage Broking and Mortgage Brokers

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Are mortgage brokers regulated? ^^^
The majority of mortgage brokers are regulated in order to protect consumers. How greatly they are regulated depends on the country or other jurisdiction in which they are located.
Can a mortgage broker help me determine the house I can afford? ^^^
By examining your income and expenses, they will advise you on your maximum monthly mortgage payment. This, in turn, along with how much you have saved for a deposit, will determine the house you can afford.
Do I have to get my mortgage from the financial institutions that the mortgage broker works with? ^^^
Most mortgage brokers have a group of lenders that they know well and whose requirements they are familiar with. This makes it faster and easier for them to give you an interest rate quote. Once you have started working with a given broker, you will most likely be financed by one of the lenders he works with. However, you are under no obligation to work with the broker if you are not happy with his choice of lending institutions.
Do I have to work with a mortgage broker? ^^^
No. You can apply directly to a bank or mortgage lender for a mortgage. However, you may want to consider shopping around for the best possible rate, and you would have to contact many banks and mortgage companies to do so. A mortgage broker will do this for you.
Do mortgage brokers have to be licensed? ^^^
There are different mortgage licensing laws depending on the country or jurisdiction and they also differ as to the extent of the license, for example whether the broker has to be licensed in the country or state he is in.
Does the mortgage broker care about the quality of the loan? ^^^
The future business of a mortgage broker will depend on the past experience of the lenders he has arranged loans with. A mortgage broker has to protect the quality of the mortgage loan since lenders will not be willing to work with him if most of his loans default.
Does the mortgage broker work for me or the mortgage company? ^^^
Neither and both. A mortgage broker serves the lender by supplying loan customers and assisting with preparing the loan application and the loan package. The mortgage broker also works for the borrower by finding the best loan available for him. But a mortgage broker is not an employee of the lender and is under no obligation to find borrowers, and a borrower is not obligated to a mortgage broker until and unless a mortgage closes.
How do I get in contact with a mortgage broker? ^^^
In today’s connected world, the fastest and easiest way to get in touch with a mortgage broker is to do a search on the internet. Be prepared, however, to be inundated by offers from mortgage brokers. You can check the reputation of any one you choose to work with the association of mortgage brokers in your state or country.
How do I know I can afford the mortgage? ^^^
The broker you work with will examine your income and expenses and be able to determine what kind of a monthly payment you can afford. As long as you have been honest about your finances, and do not have any major changes such as job loss or change, major unexpected expenses such as medical bills or large purchases, the monthly payment should be within your means.
How does a mortgage broker decide upon the best loan for me? ^^^
Once a mortgage broker has all of the information in hand concerning your income, down payment and credit rating, s/he will “shop” the loan. An experienced broker will know which financial institutions work with loans of your size, and credit rating. Among those lenders who are willing to lend to you, s/he must find the one with the most advantageous terms for you.
Is a mortgage broker a company or an individual? ^^^
They are both. A mortgage broker is employed by a mortgage brokerage company. The mortgage broker will usually have the proper credentials in the field in order to work for a mortgage brokerage.
What affects my mortgage interest rate? ^^^
Current market interest rates, your credit rating, how many points you can or are willing to pay to reduce your rate and the terms and conditions of the mortgage will determine the rate. For instance, the rate on a thirty year fixed rate mortgage will be determined differently than a variable rate balloon mortgage.
What does a mortgage broker do? ^^^
Their main function is to bring together borrowers and lenders. To do this, they may assist you in determining how much of a mortgage you can afford based on your income.
What information will I have to have if I consult a mortgage broker? ^^^
The most important thing a mortgage broker will have to know is how much the house you are planning to buy will cost, how much you can afford as a down payment, how much your income and expenses are (to see how much in monthly payments you can afford) and what your credit rating is (to determine your interest rate).
What is a balloon mortgage? ^^^
This is a non-amortizing loan. The monthly or biweekly payments of the principal will not pay off the entire loan, and the balance of the loan will be entirely due at the end of the loan period.
What is a conventional mortgage? ^^^
With a conventional mortgage, the lender obtains a lien or title to the property in return for the payment of the amount of money lent.
What is a government guaranteed mortgage? ^^^
Many governments offer programs whereby the risk of lending is either assumed by the government organization or shared between it and the lender. This encourages lenders to lower their risk and therefore lend to borrowers who would not otherwise be considered qualified. In the United States, for example, an FHA mortgage is a conventional mortgage which is insured in whole or in part by the Federal Housing Authority.
What is a mortgage? ^^^
A mortgage is used to create a lien (claim) on real estate by contract. It is a method by which individuals or businesses can buy residential or commercial property without paying the full value right away, but rather over a longer, fixed period of time.
What is a purchase money mortgage? ^^^
A purchase money mortgage is a home financing technique in which buyer borrows from the seller instead of, or in addition to, the bank. This is usually done when a buyer cannot qualify for a bank loan for the full amount of the required mortgage.
What is a reverse mortgage? ^^^
A reverse mortgage is a loan against your home that you do not have to make payments on, for the time that you are living there. When the home has been sold or you cease to live there, the balance of the loan becomes payable. Usually, the proceeds from the loan are paid out to you periodically to supplement your income. In order to be eligible for most reverse mortgages, you must own your home and be 62 years of age or older, so it is usually for retired people whose incomes are reduced and want to take advantage of the equity in their homes. Typically, the borrower doesn't have to pay anything back until he dies or sells the home.
What is an adjustable rate mortgage? ^^^
An adjustable rate mortgage, abbreviated ARM, has an interest rate that is not fixed. The interest rate varies based on the index or indexes it is tied to. This index may be the rate on government notes or bills, the Federal Housing Finance Boards National Average mortgage rate, the average interest rate paid on jumbo certificates for deposit, or many others. Different lenders may tie the adjustable rate to different indexes.
What is the difference between a first mortgage and a second mortgage? ^^^
A second mortgage is a loan taken after the first mortgage, and is secured against the same assets (the house) as the first mortgage. Since it is based on the amount of equity or ownership in the property (the difference between the current value of the property and the amount you owe on it), many times people can keep their original (first) mortgage and have a second one based on that difference in value. Usually, a second mortgage carries a higher rate of interest than a first mortgage, but it usually takes less time and effort to get a second mortgage since it may have low transaction costs. A second mortgage is “subordinate” to a first mortgage; in other words, in case of default of the loans, the first mortgage gets paid out of the liquidation proceeds before the second mortgage.
What kinds of mortgage loans do mortgage brokers offer? ^^^
There are many financing options. The most typical types of mortgages are: Conventional, government guaranteed (for example, an FHA mortgage in the United States), purchase money mortgage, a first mortgage, a second mortgage, adjustable rate mortgages, balloon mortgages, reverse mortgages, and buy downs.
Who are mortgage brokers? ^^^
Mortgage brokers are financing professionals who act as intermediaries between a consumer and a lender for a mortgage transaction. A mortgage broker originates a mortgage loan; a mortgage lender actually funds the loan.
Will a mortgage broker find out my credit rating for me? ^^^
This is one of the most important aspects of a mortgage broker. A broker will have credit reports run on your credit and then advise you whether you are a good or bad credit risk in the eyes of lenders. Some lenders are more “risk adverse” and won’t lend to poor credit risks, while others have a percentage of high risk loans, at higher interest rates, of course. The broker will try to match you with a lender who is willing to lend to you at the best rate for you.
Will the mortgage broker offer me different options concerning my mortgage? ^^^
A mortgage broker should be able to quote you various rates based on various types of mortgage loans. His goal is to find you the right mix of terms, rate, down payment requirement and monthly payment to suit your needs.