A negotiated loan means that the loan was arranged between a bank and a borrower. The bank must approve the borrower through an underwriting process and, if approved, the lender will finance the loan at the close of the mortgage. The broker will charge a fee for the services provided. A broker can work independently or with a brokerage firm.
Mortgage brokers research loan options and negotiate with lenders on behalf of their customers. A broker can also obtain the buyer's credit reports, verify income and expenses, and coordinate all loan documentation. A lender is a financial institution that lends directly to you. A broker doesn't lend money.
A broker can work with many lenders. You can check if a mortgage broker is licensed through the Nationwide Mortgage Licensing System and Registry. The broker's fee (normally paid by the lender) varies, but generally ranges from 0.50 to 2.75 percent of the principal of the loan. A mortgage broker has access to more lenders and mortgage products than a bank loan officer, which is limited to mortgages offered by the bank.
Most mortgage brokers have a group of lenders they work with, and not all brokers work with the same lenders. Mortgage brokers once had a risky reputation, so it's no surprise that many people are still hesitant to use them. To do this, a mortgage broker sits down with his clients to assess their needs and their financial situation. Borrowers who use a mortgage broker get the benefit of a more personal experience and of having a licensed professional do the preliminary work for them.
If you're looking for an FHA loan or a VA loan, for example, a mortgage broker who has experience working with those loans can simplify the process for you. If you prefer not to receive dozens of calls from mortgage brokers, you can search for them directly through sites that bring together local and independent mortgage brokers from across the country. Working with a mortgage broker to navigate today's market can be a good decision, especially for first-time homebuyers. If you're buying a home or refinancing it, an agent can help you find the best mortgage for your particular needs and situation.
As mentioned above, some lenders work exclusively with mortgage brokers and some brokers work exclusively with specific lenders. Ideally, you should find your mortgage broker on the recommendation of a friend, family member or co-worker, but if not, it's wise to check references. Brokers are also responsible for communication between borrowers and lenders during the application and approval process. People who are less qualified buyers or who buy less traditional properties will find it easier to find loans for which they can be approved through a mortgage broker than through individual direct lenders with generally stricter approval criteria.