The most recent data from the Australian Securities and Investments Commission show that half of all new home loans written across the country are through a mortgage broker. With the country’s loan market being larger now more than ever ($31 billion new residential loans were approved in the first quarter of 2021), the role of mortgage brokers is crucial for this substantial property trade.
Understandably, borrowers are worried about the financial risks involved in home loans. That is why it’s important to know what mortgage brokers do exactly, why borrowers need their help, and how to find a trusted broker when there are so many to choose from.
In today’s post, we’ll discuss the roles and responsibilities of mortgage brokers and how they can help their clients secure a home loan.
Mortgage Brokers: What Do They Do?
In simplest terms, they are advisors that help borrowers find the right financing option to purchase or refinance a home. Mortgage brokers help borrowers in many ways, but they mainly act as a bridge between a borrower and a bank when applying for a home loan.
Listed below are some of the duties of a mortgage broker:
- Assessing the financial position of a potential borrower;
- Assisting a borrower with obtaining pre-approval for a mortgage loan;
- Collecting all relevant documentation such as bank statements, payslips, etc., to process the loan application;
- Completing the mortgage application loan;
- Ensuring that the client/borrower understands all legal disclosures;
- Ensuring to source a money-saving option for the client;
- Marketing their services to borrowers;
- Researching the market to determine a mortgage product suitable for the client; and
- Submitting all document requirements to the lender.
Let’s go in-depth over some of the things they do for borrowers/clients.
- Compare suitable home loan options
They work by understanding a borrower’s financial situation first. Brokers then help borrowers find the most competitive and appropriate financing option that meets their requirements. If you are considering getting a home loan, you can benefit from a broker’s assistance in finding and comparing suitable home loan products from available lenders.
- Guide clients throughout the home loan application process
Part of their many responsibilities is to support customers throughout the mortgage application process. In fact, they manage it for their clients from submission until settlement. Some brokers even go beyond that.
To jumpstart the application process, they will require clients to complete a client brief and provide a range of supporting documents that will give them an understanding of the client’s financial situation. They will then discuss with their clients the most suitable loan products available from various lenders.
- Help clients understand complex financial agreements and terms
Reading through financial jargon by yourself can be challenging, especially if it’s your first time getting a home loan. This is where a mortgage broker’s market knowledge and expertise come into the picture. In addition to managing the loan application process, brokers also make sure that their clients understand all home loan terms, requirements, and other financial agreements.
It is their duty to let borrowers fully understand everything they need to know about their chosen home loan option, including the pros and cons. With a broker’s market knowledge and expertise, borrowers can get clear on the complicated financial jargon and can rest assured that everything is understood. The most reliable brokers out there will go above and beyond in explaining the financial agreements and terms to their clients.
- 4. Work with banks and other lenders
It’s a given that brokers have to work with banks and lenders. They only earn commissions when their clients settle on their home loans. Their services are basically free to borrowers until they get paid commissions from the bank when a home loan settles.
As such, they are careful about which financing option to recommend to ensure that their clients are able to afford to pay back their loans. They incur a clawback fee if a borrower refinances their mortgage within the first 2 years. That is to say that brokers work with their client’s financial situation in mind.
Mortgage Brokerage: A Look into the Process
As mentioned above, mortgage brokers serve as the middleman or liaison between lenders and borrowers. This time, let us review what goes on when filing for a home loan application.
Basically, the mortgage brokerage process begins with a client seeking to refinance or wishing to buy a new home.
The client approaches a broker first. The broker then approaches different lenders to confirm the requirements and rates to provide financing options suited to the client’s situation. The broker collects documents and other important details required to determine the borrower’s ability to secure financing from the lender. These documents include the following:
- Proof of employment
- Proof of income
- Credit reports
- Details of the client’s assets
Keeping in mind the loan-to-value ratio, mortgage brokers have to estimate the appropriate loan amount and type for the borrower. They then submit the financing application to a lender for approval. Once approved, the client can loan the funds from the lender.
The broker collects an origination fee from the lender for the services rendered, but they can only receive payment once the transaction has been finalized.
Why Use the Services of Mortgage Brokers?
Not everyone has a clear idea of what it takes to get a new home loan. Many first-time homebuyers consider shopping for a home loan akin to opening Pandora’s Box. The risks involved in getting it wrong run aplenty—costs, timing, financing option, etc.
Mortgage brokers provide convenience as they are able to identify a suitable home loan among the thousands available on the market. They can assist borrowers with fee management concerning their desire to approach a new lender or obtain a mortgage, including:
- application fees
- potential appraisal fees
- origination fees
They are well-acquainted with lenders and, at the same time, are also trusted by lenders. This explains why they can obtain good rates for their clients.
For Mortgage Broking Services, Trust the Seasoned Professionals
When it comes to refinancing or buying a new home, the helpful services of a seasoned mortgage broker can make a world of difference. Let our helpful team here at FinKonsel walk you through the home loan process from start to finish.