Finding the right mortgage is a complex matter, especially for a first-time buyer. Moreover, even in the past, buying a home was one of the biggest investments you could possibly make. Today, real estate prices in the world are getting higher and higher. All of this means that you definitely have a reason to be concerned.
Finding a mortgage broker means more than just finding someone to help you understand the market dynamics. It involves a scenario in which you get the best mortgage rate and find the optimal solution for your current situation.
You see, your mortgage situation affects both your financial health and your current living situation. With that in mind and without further ado, here are a couple of ways your mortgage broker can help you save time and money.
Access to More Lenders
Mortgage brokers specialize in working with mortgages. This means that they have knowledge of more suitable lenders and possess an in-depth understanding of what affects lending rates. Therefore, they may be able to recognize whether you’ll qualify for the mortgage in question.
Second, mortgage brokers are unbiased and not tied to a single bank or lender. They work with multiple such organizations, which means that they have previous experience with the mortgage that you’re currently shopping for. In other words, when you see a potential lender but are unsure whether you can trust them, chances are that your mortgage broker already did business with them in the past.
While, technically, you can access all of these mortgages on your own, the truth is that having a mortgage broker makes this a lot easier.
More Than Just Interest Rate
One of the biggest problems with choosing the right mortgage is being able to see past the interest rate. Sure, on the one hand, the interest rate determines how much you’re going to pay back (both in total and through your monthly credit payments). Still, there are other loan terms that may be just as important.
For instance, depending on your current credit score (or lack of credit score), your own type of employment or income-to-debt ratio might play a huge part when it comes to loan terms. Second, what if you assume that your current financial status might drastically improve in the past, so you plan to potentially prepay or exit a mortgage early? You need a mortgage that ticks all of these boxes, and finding it is not an easy task.
Lastly, there are numerous non-interest-related factors that you need to weigh in—for instance, the quality of customer support, the flexibility of your repayment terms, etc. The biggest problem for a first-time homebuyer is that you simply don’t know how to value these factors. Sure, it’s big but just how high on your own list of priorities? These are the answers that skilled mortgage brokers should be able to answer.
In theory, you would be able to do your own research on the subject matter. However, it would take you quite a while to do so. As a starting point, you would have to understand your own financial situation, which is easier said than done. Your ability to meet monthly payments may depend on your ability to make an accurate fiscal projection of your future couple of months/years. Needless to say, this is not something that everyone can do.
Then, you need to learn a thing or two about the industry standards. When looking at an APR, you will get a certain percentage. Now, without the right reference point, you won’t be able to tell if this is a good APR or a bad one. In other words, you need to shop around before you can find the answer to this question.
You see, the biggest difference between a professional and a layman isn’t necessarily in the quality of the end result. The biggest difference is the time they would need to accomplish the task. While looking for a mortgage, nonetheless, you’ll still have so many responsibilities, not to mention the fact that picking a mortgage is quite stressful, to begin with. A professional mortgage broker can take this responsibility away.
Understanding Other Costs
Previously, we’ve mentioned the APR of the mortgage. However, this is merely the entry cost of any mortgage. There are many other fees and taxes that you need to be aware of when preparing to get a mortgage.
For instance, there are administrative costs, origination fees, penalty fees, and even exit costs. There are some mortgages where you have a repayment fee (in a scenario where you want to exit early).
What you’re looking for is the lowest overall cost of borrowing. This is something that you can achieve by having a professional do the math and include all of the aforementioned expenses (and more) into the equation. It’s not about what you pay this month but about what you’ll end up paying over the cost of the next five years.
Bad Credit Lenders
There are some lenders who specialize in mortgage loans for bad credit buyers. Now, these mortgages are going to have considerably worse mortgage terms, but this doesn’t mean that they are all the same.
Factors like APR, loan term duration, origination fee, early repayment fee, maximum/minimum loan amount are different between lenders. Also, sometimes you won’t deal with a lender directly but with a P2P lending platform. In this scenario, even on the same platform, your loan terms will differ depending on the lender that you get. You need someone skilled, someone, who specializes in these loans in order to tell subtle (or not so subtle) differences between these lenders.
Bad credit lenders are not the only specialist lenders out there that you’ll have to deal with. Some specialize in specific property types. In a way, getting a mortgage can be a complex matter, and getting a broker ensures that you’re not alone.
Planning for the Future
While this is something that you should talk to your accountant about, there are a lot of things that are going to change in a couple of years. As we’ve already mentioned, the decision you make now is going to carry on into the next decade or two.
Sure, the deal sounds good at the moment, but what happens when things change? What about your other plans and expectations? What happens when your marital status changes? How is this going to affect your retirement savings? What about dependents?
One of the things that you need to figure out is how this mortgage is going to fit your lifestyle. With the right mortgage agent, you get someone who can explain this and back it up with their experience. After all, others have applied for a mortgage before you, and if they were on a similar financial path, chances are that your broker knows how things worked out (or are working out) for them. A bit of reassurance goes a long way.
Remember, it’s one of the biggest financial decisions of your lifetime. On average, it takes 15 to 30 years for one to pay off their mortgage. This means that the decision you make today has consequences that will span decades in the future. In other words, paying a bit more in order to hire a professional might be a great idea. For those who are still on the fence, taking these several arguments into account might help sway you either way.