By: JENNIFER PRINCE
It’s such an exciting time when you finally start thinking about purchasing your first home. Getting out of the rental game and being able to make decisions about renovating, landscaping, and painting lets you truly transition. But through all the commotion, some parts may seem scary or even mysterious, especially for first-time homebuyers.
Not only do you want to buy a home where you can picture living for a while, but you have to figure out how to pay for it, which usually involves getting a mortgage — and that means looking for a mortgage broker. But where do you start?
What is a mortgage broker?
A broker is an intermediary between a person spending money and figuring out how to invest their funds best, whether in real estate, stocks, or mortgages. “A mortgage broker’s role is to connect you with the best mortgage available based on your specific circumstances,” advises Rowan.
It’s also important to note that there is a distinct difference between a mortgage broker and a mortgage specialist. “A mortgage specialist can only offer you options that are available at their bank,” says Rowan, “But a mortgage broker can connect you with different banks or lenders.” If you are loyal to a specific bank, you can work with their designated specialist. However, a broker can connect you with various lenders.
When should you reach out to a mortgage broker?
Rowan stresses that it’s never too early to start reaching out, because waiting too late can lead to heartbreak over not being qualified or missing out on a dream listing. “The biggest mistake I see first-time homebuyers make is waiting too long to reach out to a mortgage broker,” she says. Instead, contacting a broker should be the first step in homebuying.
Brokers can look at your file, which includes your current debt-to-income ratio, credit score, and down payment. From there, they can help guide you to making any financial changes and know how your file stacks up. “Mortgage brokers will know the inside details, the nuances, and the context for where you live and current mortgage requirements from different lenders,” says Rowan.
How do you find a mortgage broker?
When searching for a broker, Rowan advises getting recommendations from a trusted real estate agent, friend, or family member. If they had a positive experience, chances are you will, too. As with many areas, you can also turn to social media to find a real estate agent or mortgage broker in your city. It also allows you to scope them out beforehand to see if they’d be a good fit. “You can usually figure out if that person fits your vibe just by taking a look at their content,” says Rowan.
As far as how you should reach out to a broker, Rowan says that it is up to your personal preference. “Email sometimes allows people to feel like they can lay out their full story better,” she says. Rowan also notes that conversations typically move to email as you send documents, such as pay stubs and a letter of employment, for the broker to add to your file.
How should you approach a conversation with a mortgage broker?
The first rule is to be truthful because the broker is on your side. “The truth is, you want to be as honest as possible with your mortgage broker because anything you hide may come out later and affect you when your future home is on the line,” stresses Rowan. For example, if you lie about your income or hide your credit card debt, they’ll find out about it sooner or later. So it’s best to be upfront from the start.
“Your first goal with a mortgage broker should be to figure out which parts of your file need improvement,” Rowan recommends. “You can ask what improvements to strive for but also what mistakes to avoid.” For example, you don’t want to make any other large purchases — say for a car or lavish vacation — around the time you’re applying for your mortgage. Additional debt can lessen your approved mortgage amount.
How do I check if a mortgage broker is competent?
Looking at a mortgage broker’s track record is the best indicator of whether or not they can successfully handle their clients. Rowan suggests asking them how many mortgages they closed last year and also asking for testimonials from former clients. When in doubt, ask them if you could chat with one of their previous clients.
Several red flags indicate you should shy away. First, avoid brokers that only refer clients to one lender, as Rowan says that they should access multiple lenders to ensure you get the best deal. Also, refrain from using brokers that are too quick to say that they’ll fund any file, which usually means you may be paying a higher interest rate. Last but not least, go with your instincts. “Trust your gut,” Rowan wisely says. “If they feel sleazy or not a fit for you, you’re probably right.”