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What is a Mortgage Broker?

What is a Mortgage Broker?

There are a number of ways you can get a home loan. But using a Mortgage Broker has got to be the easiest. Here’s why.

The first option you have when securing your new home loan is to travel to each bank, get brochures, talk to the bank’s home loan managers, review your finances, compare each loan and its many options, complete bank application forms, travel back to bank branches to submit your application documentation, and more – but this is all a lot of work and all takes a long time.

The easier option is to work with a mortgage broker – also known as a loan  broker. But what exactly does a mortgage broker do and why would you use one? In this article we will look at some reasons why a mortgage broker can make your life so much easier – for free!

What is a Mortgage Broker?

A mortgage broker is someone who specialises in finding loans for people wanting to buy a home. They can look at your personal situation, calculate the numbers and then find the best home loan option for you without you having to do much at all. Then the mortgage broker will manage the whole home loan application process with the bank on your behalf.

What Does a Mortgage Broker Do?

A mortgage broker will act as the middleman between you and the bank, taking the stress away from you. They analyse your personal finances and your home / property goals. They can then determine your loan borrowing power with various banks and the likelihood of your application being successful. The mortgage broker will then present a list of home loans for you to choose from. This is generally a list of banks that you are ‘conditionally approved’ for. You can then review the banks you will most likely be approved with and compare the features and benefits of each loan.

Once you have decided on one or more banks to apply to, the mortgage broker will work with the bank to process your loan application. The bank will need to verify the information you have provided to the mortgage broker is actually correct. For example, if you said to the mortgage broker that you do not have a credit card but the bank does a search and finds that you previously had a credit card debt, this is a red flag for the bank who may then reject your application.

What is Conditional Approval?

When working with a mortgage broker you will provide them with the necessary information they need to calculate your borrowing power with various banks and their home loan products. The mortgage broker will then generally follow the same assessment criteria that the bank itself uses. So if at the end of the analysis the mortgage broker says you will most likely be qualified with a bank, you are said to be ‘conditionally approved’ with the bank; meaning that based on the information you have provided, the bank should approve you as a new home loan borrower.

However, note that conditional approval from a mortgage broker is not the same as actual approval from the bank for one important reason – the mortgage broker is taking your word at face value whereas the bank will use their database of your credit history to fully verify what you have said. Banks have access to a lot of information and can check that what you’ve presented to your mortgage broker is true and correct. So it is best to present information to your mortgage broker the same as you would with any bank.

How Much Does a Mortgage Broker Cost?

Simply – nothing. A mortgage broker will not charge a borrower anything for their services. So how does a mortgage broker get paid? They wouldn’t do all this work for free right? The answer is – correct, they are not doing it for free, But you don’t pay, the bank does, and only if they secure a loan for you. Banks pay mortgage brokers a commission for referring a new, qualified home loan customer to them. And that is why it is a free service for wanna-be property purchasers.

Advantages of Using a Mortgage Broker:

1. They help you compare all home loan products from many banks quickly, easily, and in the one place.
2. They save you the need to visit multiple banks to collect all their information and try to work out which is the best loan for you.
3. They save you completing pages and pages of bank application forms yourself.
4. They help you know your likelihood of being approved by the bank before you submit anything to them.
5. They help you every step of the way through the home loan application process.
6. A mortgage brokers’ service is free for the home loan applicant. Yes, free!

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