What Is A Broker?
A broker, also called a loan broker, acts as a liaison between a home loan applicant and lender (financial institution, bank, etc.). Typically, the broker will work on behalf of the loan applicant; in contrast to the loan officer who works directly for the lender. Some of the most common duties for a broker during the loan process:
# Evaluation of a borrower’s circumstances.
# Assessment of credit history through a credit report and verification of income documentation.
# Researching the market to find a product that fits a client’s needs.
# Applying for a lenders agreement in principle (pre-approval).
# Gathering all needed documents from loan applicant.
# Explaining the legal disclosures to the loan applicant.
# Completing a lender application form.
# Contact the lender directly.
In the past, banks and other lending institutions have dispensed their own products. But as the market for home loans has become more competitive, the broker has become more popular. Today in Australia, brokers are the largest distributors of products for lenders.
Why Do I Need A Broker?
The broker’s role is to “watch out” for the loan applicant.One of the main reasons home loan applicant hires a broker is to help avoid predatory lending. Predatory lending is when a dishonest financial institution willfully misleads or deceives the consumer. Some signs of predatory lending include:
# Falsifying income, asset and other documentation.
# Failing to provide all documentation, Truth
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in Lending, etc. so the borrower may clearly understand the terms and lender policies.
# Convincing borrowers to refinance a loan without any true benefit.
# Influencing a higher loan amount and inflated appraisals
# Unjustly profiting on a borrower's relative ignorance about possession.
By hiring a reputable broker a home loan applicant can help protect himself from predatory lending. An expert mortgagae broker will take the time to properly explain all the financial documents to the loan applicant before they are signed and binding.
How Do I Find A Broker?
When looking for a broker there are a few things to look for:
# Experience working with major Australian banks and lenders.
# Expertise in home loans.
# No fees for service (except for the commission received from the contracted lending institution).
# A solid reputation.
Many consumers are also turning to online brokers for the sake of time and convenience. Most online brokers offer very comprehensive websites including a calculator and other helpful financial information. Consumers like the fact that they can access these tools from the convenience of their computer. There are many reputable online brokers to choose from. Make sure you check references and ask questions.
How Much Does A Broker Cost?
The broker will be paid a commission from the financial institution that issues the home loan. The rate will vary and is dependant on the amount of the loan.
