In general, a lot of work goes into buying a house. An experienced and competent mortgage broker will be able to take you through the lengthy and confusing paperwork, while finding the right home loan with the best terms and rate.
A mortgage broker is a middleman who is paid a commission to find the right match between borrower and lender (banks). However, many people, especially first-time homebuyers are only vaguely aware of what they really do. Worse, they are often mistaken for loan lenders or BFFs you can call on anytime.
Here are a few things that your mortgage broker wish you knew (and should stop harassing them about).
1) They can’t approve your loans
Mortgage brokers do not work for a bank and cannot approve your loan.
For those unacquainted with the trade, the primary role of a mortgage broker is to advise you on the best loan, get your hefty paperwork together, and ensure that they meet the loan programmes guidelines and conditions that are offered by the banks.
It is the bank’s loan officer who will ultimately decide whether or not you qualify for the loan. So, if you have been rejected the bank, it’s really not your broker’s fault.
2) They’re not your lunch dates
For many brokers who work on a 100% commission basis, time is money, and it is certainly not very cost-effective to work with people who are not serious about buying a place in the immediate future.
To avoid going on a wild goose chase, many brokers will ask you upfront for the property price and your income to ensure that you are eligible for a loan of that size.
Qualified clients who can put down and understand a healthy debt-to-income ratio will obviously make the top of their list.
If it doesn’t look like you’re serious, they won’t be too motivated to do much for you either.
3) They don’t decide how much you can borrow
Depending on their lending policy, banks may finance anything between 80% and 90% of the value of the property you want to buy as long as your income and other factors meet their criteria for loan eligibility. This means that a buyer will have to fund at least 10% by cash.
The problem typically arises with transactions involving sub-sale properties, when a disparity occurs between the seller’s asking price and the actual market value of the property. For example, the selling price of a house might be set at RM600,000, but the actual market value of the house could hover at just above RM500,000.
When this occurs, the buyer will have to fork out significantly more for the down payment, and a mortgage broker cannot help to increase the amount of financing a buyer can get.
4) If you’re refinancing, they can’t speed up the disbursement process
Some of the benefits from refinancing your property include lower monthly payments, debt consolidation and the ability to utilise the existing equity in your home.
Many people who are refinancing expect to get their cash in a week or two. In reality, the back-end and legal work that entails the refinancing process could take up to four months.
The duration it takes the bank to disburse the cash will depend on several factors, including the type of loan, the day of the week the loan closes, and whether the borrower refinanced with the lender who approved the original mortgage.
At the end of the day, perhaps the most important thing that borrowers should know about mortgage brokers is that they can only do so much for you. If you walk in with a rock-bottom credit rating and a trail of unpaid bills, no broker will be able to convince the banks to give you a good mortgage rate reserved for a low-risk client.