Perhaps you have been referred to a mortgage broker by your realtor, or you are thinking of using a broker for the first time for a pre-approval, purchase, or refinance…this is what you need to know to understand how it works. Mortgage brokers have access to a variety of lenders in the broker channel. There are some banks that do not participate in this channel. If a broker obtains an approval for you within the broker channel, and your file is fully qualifying, after completion, the lender will pay the broker and no broker or lender fees should apply.
When files are not qualifying and/or the approvals must take place outside of the broker channel, broker and/or lender fees may apply. A professional broker will always disclose the possibility of fees up front. Every lending situation is unique, so there is no blanket lending policy that applies to applications that are not fully qualifying.
- Part of what we do is track interest rates, so if you are approved and rates drop between the time your approval is issued and the completion date, we will ask the lender to re-book your rate. Different lenders have different policies around rate drops, so when you work with a broker, you know that we will be watching for any opportunity to get your rate reduced prior to funding.
- Another significant aspect of what we do is navigate the ocean of new and ongoing lending rules and policy changes. Issues that can impact the eligibility of financing include, but are not limited to: if the property is owner occupied or rental; if there are gifted down payment funds; credit scores; where the property is located; the square footage of the property; quantifiable income; and quality of supporting documents.
- Lenders track individual brokers’ cancellation ratios. When you submit a file to a lender and ask them for an approval, you have to have a high comfort level that the file fits a lender’s guidelines. This requires significant attention to detail up front. This is why providing supporting documents in the early stages is so important. Often many discussions are had with various underwriters before a file is sent in. You want to try to ensure that the lender is the best match possible for the best rate.
- Why is this important? If you have high funding ratios with your lenders, you will get better service. This is particularly important when handling emergency rush situations with tight deadlines, ie a quick subject removal for a purchase.
- A broker will do a lot of work up front to figure out how you qualify and which lender is the best fit, but we are only paid if your mortgage actually funds.
- Why is this important? If you decide to make an application through a broker, get the approval, and then go back to your own bank, the broker has done a significant amount of work without any compensation and when the approval is cancelled, it is a strike against their funding ratios. This not only impacts the file at hand, but future files as well. If you have ever been in a situation where you have not been paid for your work, you understand how devastating this situation can be.
- When does this happen? When someone’s own bank has let them down in the critical moments leading up to a purchase deadline only to turnaround and provide an approval after another bank has issued a commitment. When there is a level of familiarity with the bank you currently have your business with, it can influence you to want to stay with your bank and say no thank you to the approval the broker delivered.
Your broker’s time and expertise is valuable and can be critical components for a smooth, efficient, and competitive approval. Today’s lending environment is complex and laden with Compliance requirements. We help navigate the process to make it easier for you, and we will devote ourselves to getting you approved every time.
When you approach a broker for service, please take a moment to understand the relationship between the banks and our service to our clients.
Click here for a 1 minute animation video that explains “Why Use a Mortgage Broker.”