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It can be overwhelming to know where to start when you are looking to get a mortgage. There are so many different rates, terms, and loan types out there, but at the end of the day, your mortgage should be tailored to fit your needs as a homebuyer. Luckily, the process of finding the perfect mortgage broker is easier than ever before.
Before starting to look for a mortgage broker, the first thing you should do is narrow your search by determining your needs.
A mortgage broker will often assist you in securing a loan for your home purchase and any other type of funds. Finding a good mortgage broker can be difficult, but following these few steps should help you find someone that will work to meet your needs.
In Ontario, mortgage brokers and mortgage agents are mortgage professionals licensed by the Financial Service Regulatory Authority (FSRA) to advise, find, and negotiate the right home loan financing for you. A mortgage broker/agent works for a licensed mortgage brokerage.
Even though the terms “mortgage broker” and “mortgage agent” are used interchangeably, their regulatory responsibilities are somewhat different.
Nonetheless, they have the same responsibilities toward you—advising, finding, and negotiating the mortgage loan that best suits you.
One of the significant advantages of working with a licensed mortgage professional is access to a large pool of mortgage lenders.
Most mortgage lenders in Canada distribute their mortgage loan products exclusively through the mortgage broker channel network.
A mortgage broker should be your go-to person to find the right mortgage financing for you, whatever your credit and financial situation.
Ontario alone has 2,484 licensed mortgage brokers and 12,072 licensed mortgage agents.
Having many options is better in an ideal world, but that’s just wishful thinking when hiring the right mortgage broker.
Many licensed mortgage professionals make it difficult to sort through them to find the right broker/agent for your unique needs.
Also, the mortgage broker does not necessarily need to be your next-door neighbour or even from your community with the internet. Everything can now be done online and virtually.
But to make matters even worse, a simple Google search for “mortgage broker” opens you up to an avalanche of ads and messages on mortgage brokers, making the process of screening and hiring the right mortgage broker/agent even more difficult.
In addition to the right set of skills, you want a mortgage broker whose first, second, third, and last priorities represent you and your interests only!
A good mortgage broker should help you navigate this complex mortgage market.
Now that we have gotten that out of the way, just who is a mortgage broker/agent?
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Here are our six must-ask questions if you plan to use the services of a mortgage broker.
The answers to these questions should help you select the right mortgage broker for your mortgage loan transaction.
How many mortgage lenders do the brokerage represent, or how many lenders did the brokerage use last year?
These are essential questions to ask. You want to ensure that the broker can access mortgage products from a reasonable number of lenders.
This helps prevent your broker from recommending mortgage products from a single lender or not searching the market for the right mortgage loan that best suits your unique situation.
Ask your broker for a recommended mortgage loan with three to five options from different lenders. This recommendation should be a detailed analysis of each mortgage product’s pros and cons and how they best suit your unique needs.
Again, which mortgage loan or lender you commit to should be your decision. The broker should guide you through this process.
Just like with anything in life and work, mortgage brokers do specialize. You’ll find mortgage brokers who specialize in:
However, generalist mortgage brokers and agents will work with all sorts of clients, regardless of their income, credit, or location.
But if you have a toothache, who will you go to?
A dentist, an optician, or a general physician?
If your answer is, “A dentist,” we are both on the same page.
It is valid with mortgage financing. If you have a low credit score or poor credit history, you want to go for a bad-credit specialty mortgage broker.
Mortgage loans are not cheap, nor are they free. There are costs like the lender origination fee, appraisal fee, brokerage fee, lawyer fees, title registry fees, and more.
The mortgage broker should estimate the costs and fees explained in the previous point.
The good news is, most often, these fees are added to the mortgage loan, which lessens the immediate impact of the cost of borrowing.
If you are buying a house in Ontario, at a minimum, in addition to your down payment, lenders will want to validate that you have enough money to cover the lawyer fee, land transfer tax, title search fees, and more.
Banks’ standard closing cost estimate when buying a house is 1.5% of the property value.
Let’s say you are buying a $650,000.00 house.
1.5% X $650,000 = $9,750
In addition to your required down payment, the lender will want to validate that you have $9,750.00 in cash or near-liquid assets to cover the closing costs.
If you are going for an alternative mortgage solution, expect to pay a lender fee and probable brokerage fee in addition to the lawyer and appraisal fee.
The lender fee is usually approximately 1% of the mortgage amount.
Lender fee = 1% X $650,000
Total minimum closing cost for alternative mortgage solutions
= $9,750 + $6,500
You would expect that a bad-credit mortgage broker should represent bad-credit mortgage lenders.
You wouldn’t expect your broker to send your application to TD, Scotia-bank, or RBC if your credit score is the mid-to-low 500.
That is why it is essential to ask which lenders the broker works with, especially when you have a bad credit profile or non-conformable income.
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More mortgage shops are adopting modern technologies like e-signature and video conferencing to serve you better.
Do you prefer to take time off from your busy schedule and jump from one mortgage shop to the next? Are you more comfortable discussing your mortgage loan over the phone or in person?
Your answers to these questions should help you decide who to hire as your mortgage broker—one who requires you to come to the office or has a flexible schedule and won’t mind helping you in the comfort of your home.
It’s essential to confirm whether there will be a consultation fee or not. What if the broker has invested time and resources, but the application does not go through? Will you be required to reimburse the broker for the lost money?
Be sure to ask such questions of whoever you consider hiring.
In summary, your mortgage financing will be expensive, and the process may even be stressful if you hire the wrong mortgage broker.
It’s not a bad idea to treat your mortgage broker hiring process like a job interview. We have outlined six must-ask questions to use as your template when hiring a mortgage broker.
If you need help, Kenwood Mortgage is at your service to assist in sourcing and negotiating the right mortgage financing for your needs.
Again, don’t be in a hurry when choosing a loan broker. Take your time and do your research.