How to choose the right mortgage broker in Toronto?
As a home buyer, when you’re searching for the best mortgage terms and rates, it’s possible to contact each lender in your location for information on their specific terms and rates yourself; but this can also be extremely time-consuming. That’s why many home buyers seeking mortgage generally choose to work with a mortgage broker.
What Does a Mortgage Broker Do?
A mortgage broker serves as the go-between in the mortgage market who contacts various lenders on the buyer’s behalf. In other words, they connect customers seeking a mortgage with potential lenders.
Though a mortgage broker does not originate loans, the broker will review your financial situation, such as your income and credit score, to determine which type of loans will work best. The broker will also use your financial situation to initiate the loan process for you.
Justo works with online Mortgage Brokerage Homewise to help make the process as simple and seamless as possible.
The mortgage broker’s responsibilities also include:
- Help prepare the buyer’s application for the lenders
- Deal and negotiate with various lenders on your behalf
- Work with your realtor or real estate closing lawyer
- And more
The broker will typically receive their compensation from the chosen lender. In some circumstances, you will be required to pay the broker fees; however, the broker does not work for the lender.
The fees a broker charges depend on various factors, including the location of your home, fluctuations in the housing market may also affect the rate and various other factors.
Related article: The Ultimate Buyer’s Guide for Buying a House in Toronto
What is the Application Process?
First, the mortgage broker will collect all required documentation needed to complete the loan application from the applicant.
They will then provide the lender with the application, and the lender will begin an assessment of the applicant’s creditworthiness. At this point, if further documentation is needed by the lender from the applicant, the mortgage broker will help make the process of submitting the documentation easier for the applicant.
Otherwise, if your application is approved, you will attend the loan closing, and the loan process is complete.
Do I Have to Use a Mortgage Broker?
As a buyer, you don’t have to use a mortgage broker to find a lender or to secure a loan. In fact, choosing a lender on your own can be just as effective, and it will also help save on mortgage broker costs.
Going at it on your own also enables you to review each certified lender in your area, which provides you with more loan options, as opposed to just limiting you to the list of lenders that the mortgage broker works with. Many lenders also offer rate and pre-qualification quotes that you can use to pre-qualify yourself, similar to a mortgage broker.
Searching for lenders online also helps make it easier to browse various home loan providers, and you will also find that some lenders have less strict approval requirements, as well as lower costs, than many other loan sources, which also makes searching for a lender on your own an attractive choice.
However, if your priority is to find the best rate on your mortgage, or you simply do not want to do the additional work of finding a lender yourself, then enlisting the aid of a mortgage broker can be beneficial.
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Some Questions to Ask When Selecting a Mortgage Broker
Should you choose to reap the benefits of having a mortgage broker do much of the work for you, you should know that not all brokers are created equal. When selecting a broker, there are certain questions you can ask to be sure it is the right broker for you, including:
Why is working with you more beneficial than working directly with a lender?
When screening a possible mortgage broker, it should be pretty evident why you want to work with them. There should be no question as to why you should choose them over directly working with a lender without even having to pose the question to them.
On the other hand, if you are feeling questionable about the broker, simply ask him or her why you should work with them as opposed to working directly with a lender. If the broker doesn’t give you a definite sense of the benefits he or she provides, or the broker’s answer fails to make you feel confident in them, then it’s safe to say you should go with a different broker.
In the end, you want to make sure the money and time associated with working with a broker justify the investment. So, choose wisely.
What is the likelihood I’ll be able to secure a mortgage?
The first step to securing a home loan is to have your finances in order. If you have income or employment issues, have declared bankruptcy, been in foreclosure, or your credit is low, etc., you should try to get it straightened out before applying for a mortgage; otherwise, it can affect your ability to get approved for a mortgage, as well as the rate you receive.
Let your broker know If any of these issues apply. If the broker attempts to convince you that these factors will not affect the terms of your home loan, then you should be leery.
Ultimately, you want to work with a broker you can trust, which means if your creditworthiness is questionable, he or she should be willing to explain how this will impact your loan qualification as well as the loan rate. By doing so, it will help you and your broker set sensible expectations.
How many lenders do you work with?
While some brokers only work with a select group of lenders, there are others who work with a broad range of lenders.
Since one of the main reasons for working with a broker is to find the best rate among a wide range of lenders, it makes sense to work with a broker that has a large pool of lenders to choose from. Be sure to ask your broker how many lenders he or she works with to give you a general idea of the span of loan options you have available, which will give you a better chance to receive the lowest rate.
Additionally, though many mortgage brokers have access to the same lenders, each lender still offers their own mortgage products. You also need to be sure the broker has substantial knowledge of the various products that each lender offers in order to provide you with the best option for you.
The mortgage broker should be able to clearly explain the ins and outs of each product so that you can plainly understand their decision-making process.
Understanding the motive behind the mortgage broker’s decision making is also important because brokers are offered different compensation costs by different lenders, which are solely dependent on which product they choose. This will ensure the broker’s decision isn’t swayed by the lender’s compensation fee.
Do you have any references?
Whether you plan to actually use the broker’s references or not, it still makes sense to ask for them, simply to see how he or she reacts.
If the broker readily and proudly supplies a list of references and their contact information, you’ll know they have a good track record with their clients. Otherwise, if you sense that the broker seems uncomfortable with providing references, or the broker stalls to answer the question, then you should consider doing business with a different broker.
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More Tips for Finding/Working With a Mortgage Broker
- If possible, when assessing potential brokers, try to meet with them face-to-face, which will enable you to pick up on various subtle details, such as is if their workplace is professional and organized and how attentive they are to you, etc. Doing so will help provide you with a more realistic idea of what working with the broker will be like, which can help you make your choice with confidence.
- Interview at least three brokers to gain a general idea of various brokers and what they have to offer.
- Avoid entering into a financial situation without doing your homework first. Conduct your own research to learn what kind of rates are available to you, using a rate comparison site. This will help you determine if the rate the mortgage broker is giving you is actually a good one.
- If you are a first time home buyer, be sure to ask your broker how much you’ll need for a downpayment in order to still get a good rate. It is a common misconception that first time home buyers must put down a sizable amount to get a good rate. In fact, it’s possible to put down as little as five percent and still get comparable rates to someone who put down 20 percent or more. Even though this is your first home, your mortgage broker can still work to determine how much of a down payment you’ll need.
Overall, obtaining a good rate on your mortgage can help you feel savvy and good about your investment. Remember, you have two options for locating lenders with the best home loan rates, including finding one yourself, or enlisting the aid of an experienced mortgage broker to find one for you. Whichever you choose, it simply boils down to personal preference.
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