For those not purchasing upfront, obtaining a house will require applying for a home loan, which those who have gone through the application process will be the first to tell you that it's not that straightforward.
However, there are real estate professionals in the field when it comes to applying for a home loan, and they're known as mortgage brokers.
Mortgage brokers are responsible for more than 50% of home loans in Australia, so what is it that these brokers are doing that causes a majority of potential Australian homeowners to turn to them for home loan assistance?
What is a Mortgage Broker?
A mortgage broker is a financial advisor that acts as the middleman between a potential home buyer seeking a home loan and a bank who would act as the lender.
On the surface level, a broker is seen to gather information about their clients to understand their situation and provide financial advice, financial services, and suggest particular lenders and home loan options to cater to the client.
Brokers may also assist their clients with the loan application process once an appropriate loan has been found.
What Does a Mortgage Broker Do?
As mentioned above, a mortgage broker is a go-between for the client and the lender on the surface level, but below the surface level lies additional factors that lead brokers to be a pivotal part of the home loan process.
When planning to purchase a home (especially for the first time), mortgage brokers provide potential borrowers a personal touch to the home buying process, as clients will have a catered plan of attack put together that understands the client's financial situation.
Brokers by nature cherish the relationship between themselves and a client, as it proves to be a win-win situation for both parties involved. This personal touch provides a stark contrast to a bank that has its own needs in mind rather than the home loan applicant, offering its interest rates and products.
Going through a bank will also limit your opportunities for the best loan options, as a bank will push their plans over competitors. Mortgage brokers will assess home loans provided by different lenders and determine the best recommendation they can offer their clients to get the most out of their loan amount.
The act of mortgage broking also consists of helping ease the typically daunting task of buying a home, which is why a broker can take care of the aforementioned application process to leave the client a little less stressed.
In addition to handling the application process, brokers can ensure you won't even need to make a phone call to anyone else during the process, as they'll organise your documents, speak to the lending party on your behalf and continue pushing the process along so you can purchase a home sooner.
Should You Use a Mortgage Broker?
For the more experienced homebuyer, mortgage brokers might not be needed, but even then you'll find experienced clients tied to the hip to similarly experienced mortgage brokers.
It can cross an individuals' mind that they may not need a broker and that they can search on Google and arrange their mortgage loan themselves. Heading down this path, however, excludes credit policy knowledge that those in brokerage know.
Good brokers will typically have strong relationships with the lenders you're trying to borrow from, which will enhance your chances of approval for a loan. This relationship will also position you for a great chance at negotiating the loan terms.
Loan terms can improve in manners of sharper fixed interest rate or excluding fees, including accounting costs, and could even levy the price of your Lenders Mortgage Insurance (LMI).
There are also policy exceptions that don't appear on the front of a contract that brokers will be aware of that could potentially cause your application to decline.
In short, mortgage brokers are the first to understand what the bank is looking for when lending out home loans. Utilising a broker will give you a better chance of getting approved, as well as make the process a lot simpler.
If you're after more details about mortgage brokers or similar financial lending institutions, check out the Mortgage and Finance Association of Australia (MFAA) here.
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