Why and How to Hire a Mortgage Broker

Jun 12, 2024 | Additional Insights, Podcast

Don’t buy that house just yet! Learn how a good mortgage broker may be able to go get you a better interest rate and help you navigate the maze of mortgage complexity. Listen in to discover if a mortgage broker can help you reduce the stress of financing a home purchase.

Aaron Kirsch: Thanks for joining us. I’m Aaron Kirsch, Chief Client Advocacy Officer at GreenUp Wealth Management. Houses are really expensive, and most people just can’t buy them outright with cash- they have to get a mortgage. On today’s podcast, we’re going to talk about why and how to hire a mortgage broker. With me is Kelly Mercer, Wealth Advisor at GreenUp Wealth Management. Hi Kelly.

Kelly Mercer: Hi Aaron.

Aaron Kirsch: Kelly, you are the resident expert at GreenUp on mortgages.

Kelly Mercer: That’s correct, yes. Before joining GreenUp, I spent about five years in the mortgage space helping people finance their homes.

Aaron Kirsch: Well, perfect. Thank you for being here with us. Let’s start with talking about the difference between a broker and a lender.

Kelly Mercer: Definitely. So, I think the first thing for people to understand is that a lender or a mortgage loan officer works with one lender specifically, whether that be a bank or a credit union. They are specifically designated to originate loans for that specific lender. A broker on the flip side works with multiple different institutions and has access to, let’s say, 25 to 30 lenders at a time.

Aaron Kirsch: Okay, Kelly, so the difference between a broker and a lender- a lender is just one particular institution that’s going to lend money, whereas a broker is someone who’s shopping for you at dozens or even more lenders to find the right loan for you. So, we know the difference now between a broker and a lender. Kelly, why would you go with a mortgage broker instead of going directly to a lender?

Kelly Mercer: So, I think there’s a couple different reasons why someone would hire a broker over a direct lender. And one is, as we’ve already discussed, would be the access, the broad network that you would have available to you through that broker and his relationships with multiple different lenders. But also expert advice, a little bit more of convenience and potentially more tailored solutions for your current situation, negotiation power, and potentially faster loan processing times.

Aaron Kirsch: Kelly, you mentioned convenience. Hiring a mortgage broker is more convenient. Can you tell us a little bit more about that? Why is it more convenient to have that mortgage broker over just going directly to the lender?

Kelly Mercer: Brokers will help you streamline the mortgage application process by handling much of the paperwork and the communication with the lenders, so it’s not only going to save you time, but it also reduces some of the complexity and the stress that goes along with securing the mortgage on your own.

Aaron Kirsch: Yeah, that’s a good point. And when you’re filling out a mortgage, anyone who’s done that before, you know it’s a very thick stack of papers and things that you have to sign. So, it’s good to have someone in your corner walking you through that.

Kelly Mercer: Most definitely. I’ve got some war stories for you if we’ve got enough time.

Aaron Kirsch: And Kelly, you also mentioned negotiating power. How does a broker negotiate with different lenders to get someone the best rate possible?

Kelly Mercer: I think experienced brokers have the skills and the industry knowledge to negotiate better terms and lower interest rates with the direct lenders on your behalf. They are In the market every single day out there shopping for you. So, they understand what’s currently there for you and they can speak the language with those direct lenders and ultimately secure more favorable loan conditions.

Aaron Kirsch: And I’m guessing that the interest rate differences aren’t huge between lenders. But when you’re borrowing for a house, you’re buying hundreds of thousands of dollars. It can make a difference, right, Kelly?

Kelly Mercer: It most certainly does. And I think having the peace of mind that somebody is out there making sure that whatever loan product that you end up going with, with whatever lender you end up choosing, was the best available.

Aaron Kirsch: Thanks, Kelly. Another question I have for you: we live in this do it yourself world. People are used to going online and finding their own lenders. You made a good case for hiring a broker. Brokers get paid commission. How does a broker’s commission affect your loan?

Kelly Mercer: Mortgage brokers typically receive a commission from the lender once the mortgage is finalized. So, this commission is usually a small percentage of the loan amount, commonly somewhere between a half percent and 1.5 percent. The lender’s commission does not generally affect the loan terms offered to you. So, in any loan that you would receive either if you go directly to the lender yourself or through a broker- those should be clearly stated on any documentation that you would receive and you’d be able to stack that up against the options that would be given to you.

Aaron Kirsch: Okay, so it’s very possible that doing it yourself isn’t necessarily going to save you any time or money than working directly with a mortgage broker who might be able to get a loan for you for the same price or less, and at the same time help you do the shopping, help you with the paperwork, help you through every step of the process.

Kelly Mercer: When you put it all together from a comprehensive standpoint like that, yes. I think the overall costs are very similar, but the benefits that you would receive working with the broker would far outweigh those from the direct lender.

Aaron Kirsch: Kelly, another thing I was thinking about is if you’re doing it yourself and you’re talking to multiple lenders, each of those lenders are going to have to pull your credit. Is that right?

Kelly Mercer: Yeah, that’s right. But there is a 45-day window in which mortgage shoppers can have their credit pulled more than once. And each subsequent pull after the first would not count against them or not impact their score as long as they’re all credit pulls from mortgage lenders themselves. So, it just depends. It comes down to a little bit of a preference thing. That broker only has to pull your credit once and they’ve got access to 20, sometimes 28 banks and someone would have to have their credit pulled 28 times if they did the shopping that a broker would do for them.

Aaron Kirsch: And then if you’re shopping for more than 45 days, having all those credit pulls can actually affect your credit score, right?

Kelly Mercer: That’s correct. Yes.

Aaron Kirsch: Great. Thanks, Kelly. All right, so we’ve just talked about the benefits of working with a mortgage broker. Kelly, how do you find a good mortgage broker?

Kelly Mercer: I think you need to go to your centers of trust in your life, whether that’s family, friends, or other professionals that you already have working with you, asking for references, and then reading about that broker’s reputation online. Any broker worth their salt is going to have a Better Business Bureau review page where you can see reviews from clients that they’ve worked with in the past.

Aaron Kirsch: Got it. So, we can talk to friends and family, get referrals from professional relationships like your GreenUp Wealth Advisor or your CPA or other people who have professional networks. And then what about after you’ve got a few names, do you recommend interviewing that broker and what should you ask that broker about?

Kelly Mercer: I think there are some things to definitely look out for and to make sure that you’re that you’re talking about in that upfront conversation with anybody that you work with. And that’s from a transparency standpoint. I think a reputable mortgage broker should be upfront about their fees and how they’re compensated, and they should also disclose any potential conflicts of interest, such as if they receive higher commissions from certain lenders versus others to ensure that you’re getting some unbiased advice. Also, it wouldn’t hurt to start the process off, just make sure that you can verify that the broker is licensed and in good standing. In the US, all mortgage brokers are required to be licensed by the NMLS, so you can check for any disciplinary actions or complaints against that broker.

And ask about their limitations. Some brokers have preferred relationships with specific lenders, which could limit the range of loan products that they offer. So just make sure that the broker is providing a comprehensive selection of options and not just pushing you towards certain lenders for their own benefit.

Last, but most importantly, I think a good broker takes the time to ensure that he or she understands your specific situation, the goals that you guys have for the home buying process, and understands any specific needs that you have throughout that process itself. So that’s going to lead to a much more personalized recommendation rather than just a one size fits all solution.

Aaron Kirsch: Well, Kelly, thank you so much for giving us all this information. I guess when you’re buying a house, it’s very different from buying a widget on amazon.com. You don’t just hit the buy button. You’re spending a lot of money on what will probably be one of your biggest purchases in life and everyone’s financial situation is different, so it seems to make sense, in this particular case especially, to have a professional in your corner helping you out.

Kelly Mercer: I think that’s right Aaron. Buying a home for most people is the biggest purchase that they’ll ever make in their life. The process can get complicated and can surely become stressful, and that’s why having a seasoned, experienced professional on your side, shopping for you, doing most of the legwork is imperative.

Aaron Kirsch: That’s great, Kelly. Well, it does seem to make sense to get a professional in your corner. Get a mortgage broker who’s going to save you some headache, save you some stress, and make sure everything’s done correctly. Talk to friends, family, and professionals so you can find the right person for you. For Kelly Mercer and the entire team at GreenUp Wealth Management, I’m Aaron Kirsch. Thanks for listening.

Author

  • Kelly Mercer

    Vice President | Wealth Advisor | Kansas City -- Kelly is a dynamic Wealth Advisor with a diverse background in the mortgage and wealth management sectors. Driven by a desire to expand his expertise and provide more comprehensive financial guidance to his clients, Kelly made the strategic decision to transition to GreenUp Wealth Management.

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