If you are intending to buy a house in Australia, you may have asked yourself, what does a mortgage broker do? A mortgage broker is someone who helps customers find the right mortgage, and then makes sure that everything goes smoothly.
Since they are not actually lending money, mortgage brokers do not rely on interest rates for profit. Instead, they earn a commission when they help you get approved for a loan.
Keep scrolling to learn all the duties, costs, pros, and cons of mortgage broker.
What is a mortgage broker?
A mortgage broker can be either an independent financial advisor or a financial institution that specialises in helping people find the most suitable mortgage for their circumstances.
They work with banks and other lenders to identify the best deals for their clients, and then help them navigate how to get home loans, get approved, and close on the home purchase or investment property.
What does a mortgage broker do?
The duties of a right mortgage broker are to:
- Work with borrowers to determine their needs, goals, and financial situation
- Determine which loan program is best for them
- Simplify the FHA loan or VA home loan process and lender’s mortgage insurance
- Give applicants a listing of financial institutions that participate in the selected loan program.
- Help borrowers understand the loan programs’ terms and conditions
- Help borrowers complete the necessary paperwork for a mortgage application process and pre-approval
- Collect and review all documents, including credit reports and tax returns so that they are correct and up-to-date before they are submitted to the lender.
- Ensure that legal disclosures are clear to the borrower
- Submit all documents to the lender along with the loan application fee
- Ensure choose a cost-effective mortgage for the borrower
What are the advantages of using mortgage brokers?
Benefits of using a mortgage broker:
Knowledge and expertise
Most mortgage brokers are experts in the home-buying process, so they know what questions to ask and where to look for answers.
They also know about different types of mortgages, including conventional loans and government-backed loans like FHA or VA loans.
More options
Mortgage brokers have access to many more lenders than you would on your own, which means they can help you find the best mortgage option for your situation.
Less paperwork
Mortgage brokers can help you with all the paperwork involved in applying for a mortgage—from submitting your loan application to getting your credit score and other information from the lender.
They can also help you understand what each document means so that you know exactly what you’re signing up for.
Lower costs
A mortgage broker will likely save you money on fees since they’re not charging for their service directly as a bank would charge for theirs.
You can also expect lower interest rates since a qualified mortgage broker tends to negotiate better deals than banks do by working with multiple lenders simultaneously.
What are the disadvantages of using a mortgage broker?
The drawbacks to using mortgage broking service are as follows:
Limitation
Brokers usually have access to the entire market of lenders and will generally try to find you the best deal. But not all mortgage brokers work with all or different lenders or banks.
This means that if you choose a broker who doesn’t have a relationship with a particular lender, they might not be able to help you out.
Accredited brokers will help find the best rate and lender for your situation without bias. But not all brokers are equal, so you should always ask questions about their relationships with lenders and how many lenders they work with.
Qualifications and experience
Not all brokers have special expertise with your financial situation or the real estate market, and some may not even be working in your best interests.
Before deciding to use a mortgage broker, it’s important to do some homework.
What is the cost of using a mortgage broker?
As you might expect, the cost of a mortgage broker will vary from broker to broker and is influenced by a variety of factors, such as how much you want to borrow. A mortgage broker typically costs between 0.65% – 0.70% of the loan amount + GST.
However, different brokers can charge in different ways if they are a member of the Mortgage and Finance Association of Australia. One might charge fixed fees for all loans under a certain amount, whereas another may charge for every step in the process of finding borrowers their home loans at an hourly rate.
Besides, some brokers charge a certain percentage of the total loan amount while other mortgage brokers charge a commission fee. Additionally, note that some lenders pay commissions to the mortgage brokers depending on their accounting schedule within 30 days, typically, after closing a deal.
Conclusion
Finding a mortgage broker that is truly trustworthy and knowledgeable in today’s market can be quite a challenge.
Always work with a qualified mortgage broker who is registered with the Australian Securities and Investment Commissions and has an Australian Credit Licence.
If you’re ready to begin the process of getting a home loan, get in touch with Soho Home Loans and we can help you increase your chances of an approval.
