An ah-ha moment

I’ve had two conversations with friends during the last week about what exactly a mortgage brokers does.

Because I am a mortgage broker and immersed in the industry, I assumed  everyone understood the difference between mortgage brokers and bank employees.

I had an “ah-ha” moment this week.

Over the weekend a friend said, “I don’t understand why someone would use a mortgage broker. We’ve always just gone to our bank.”

This friend has squeaky clean credit, two strong incomes in the household, and a significant amount of equity in her home. She would be able to approach any lender and have a mortgage approved.

I stumbled a little bit with my answer. I talked about how brokers have access to many different lenders, and how brokers most often have flexible schedules.

What I missed was:

• the personalized service brokers offer.
• brokers specialize and are experts in their field.
• we work for our clients, not any specific lender.

I started my career with one of the chartered banks. I benefitted from fantastic training opportunities. I realize now that being a broker is truly a luxury. I am able to focus on one product line and seek suitable options for my clients.

What exactly do mortgage brokers do?

Mortgage brokers can be either independent or work for one specific financial institution. Independent brokers have access to multiple lenders including chartered banks, credit unions, mono-line mortgage companies, and private lenders.

Each of these types of mortgage lenders has slightly different policies and lending criteria and offers different rates accordingly. For instance, chartered banks tend to be more conservative and extend credit to clients with very clean credit and a strong employment history.

Private lenders, at the other end of the spectrum, will consider clients with bruised credit or more erratic income, provided they have a significant amount of equity.

A mortgage broker will meet with you and assess your situation. Your broker will then explore options to find the best fit for you, evaluating considerations such as your credit and employment history, down payment available, and your income. 

After spending some time getting to know a bit about you, your long-term goals, and what type of property you are hoping to purchase, they will offer recommendations and suggestions to help point you in the right direction.

The beauty of working with independent brokers is that they complete your application and pull your credit bureau once, then shop different lenders on your behalf.

This is a significant advantage as you might spend hours going from appointment to appointment trying to do this on your own. 

If your situation is unique (i.e.: you are new to Canada, have less than perfect credit, you are self-employed), a broker will be knowledgeable about specialty programs offered by different lenders. In cases like this, they will be able to explore different financing options for you.

Once you have written an offer on a house and have been approved for a mortgage, your mortgage broker will connect with you to collect documents and signatures required by your lender.

They will work with you until your paperwork goes to your lawyer (or notary) and be available to answer questions as you move through the process.

So what does this mean for clients?

One of my clients recommended me to a co-worker who is shopping for her first home. My client raved about the service mortgage brokers provide, and as they chatted she came to realize that her co-worker had no idea what mortgage brokers do. 

When my client relayed this story to me, I recognized that a lot of the service brokers provide happens behind the scenes.

This led to an interesting conversation between my client and I. Granted, she is one of my biggest cheerleaders –  but she went on to tell me how she told her co-worker about why she feels working with a mortgage broker is the only way to go.

From her perspective, here are some of the benefits of working with a mortgage broker:

• RELATIONSHIP – I took the time to get to know her as a person and learn about what was important to her.
• PERSONALIZED SERVICE – Brokers are not bound by a 9-5 schedule, so we were able to work around our clients’ schedules.
• COMMUNICATION –  I kept her updated as we moved forward with her application. Frequent updates helped reduce her anxiety.
• OPTIONS –  Her bank was not able to finance the type of property she chose. With access to more than 50 lenders, each of which has slightly different policies, I was able to research these options to find the best fit for her unique property.
• EDUCATION AND ADVICE –  I spent time with her to make sure she understood the process and her options. I connected her with other professionals that I have worked with in the past. What she found most valuable was that I provided a breakdown of closing costs after our first meeting. She said that in four previous home purchases no one had done that for her.

I’ve told people many times that the beauty of being a mortgage broker is that we concentrate on one product line – mortgages. Each client we work with is unique, and each lender we work with is different.

As brokers, we learn something new every day and make a point of keeping up to date with legislative changes and new products as they are introduced.  

A key take-away here is that mortgage brokers are specialists – they focus solely on helping their clients find mortgage financing.

Turnaround time for a straight-forward mortgage application in the broker world can be as little as a few hours and is more typically between 24 and 48 hours.

Most clients we work with say that waiting for an answer about their financing is the most stressful part of the process, so such a quick turnaround time is one of the most significant benefits of working with a mortgage broker.

As a rule (unless your broker has to seek out a private lender), the personalized service provided by a mortgage broker comes at no cost to you. Mortgage brokers work on a commission basis, and this commission is paid by the lender after your mortgage is finalized.

This does not affect your interest rate in any way, and you will likely find that mortgage brokers are highly motivated to help you find a mortgage because if they don’t, they don’t get paid.

Whether you are looking to buy a home or refinance your existing mortgage, a mortgage broker can help you navigate your way through the new mortgage rules.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.