Mortgage Brokers al Affiliation Introduction A mortgage brokerage performs a range of different and vital functions in theeconomy of any given country. First we look into the term mortgage broker. A mortgage broker plays the role of intermediary between the buyer and the seller (Bodie & Marcus, 2014). The buyer is the customer who is looking for a mortgage which is of the best quality and attractive deal. The bank on the other hand is the willing seller who is willing to sell the mortgage to the willing clients (Reed, 2010). These clients may not have information on the current trend of obtaining a mortgage loan from a financial institution such as a bank.
Mortgage rates have significantly changed in the past several years as shown in the charts shown in the appendix. Such buyers will one way or the other consult individuals who are conversant with the existing market terms and conditions. To assist such individuals, the assisting party comes into play (The Mortgage marketplace, 1900). They are called the mortgage brokers. These brokers have connections with financial institutions which lend money to willing home buyers.
Mortgage brokers know and understand the industry in depth. They guide the buyer on the best deal to engage themselves with. Contacting a mortgage broker will help the buyer avoid the flaws which flock the market nowadays (Bodie & Marcus, 2014). Mortgage brokers are of two types. Those who really represent the clients who are borrowing and those does not represent the client. In the first type, the broker has an agency relationship with the borrower. The category is also a two sided one. The broker who receives fees from the lender himself and the broker who receives fees from the consumer.
The second type of broker makes the loans available to the consumer through the use of business relationship with the lending institutions (Reed, 2010). They usually play the role of lending institutions by presenting themselves as the providers of loans to the borrower. Functions The first function of brokerage such as in mortgage is that it makes the process of obtaining the loan easy. If acquiring a loan from the buyer’s bank proofs difficult because of his/her credit worth nature, seeking assistance from a mortgage broker will make it easy.
This is so because they usually have a vast connection with the money lending institutions. Their dealing with different financial lending institutions gives them upper hands in standing a chance of assisting a client acquire a loan (Reed, 2010). The requirement is a good financial record on the part of the client. It is amazing how the brokers wade around the mortgage deals to hit on the best. The second function is that of handling the details. In a given deal, they serve to safeguard their clients; offering safety and security.
They ensure peace of mind to their clients. They handle all the details to facilitate the deal of qualifying to acquire a mortgage loan (Reed, 2010). All the transactions affecting the transaction are handled by the broker. Failure to handle the details well on the part of a broker may lead to a loss of either ransom amount on the part of the lending institution or property on the part of the borrower. When engage broker’s in securing a mortgage loan, it is advisable that the borrower verify his/her credibility.
This is so because many cases have emerged where innocent borrowers have been conned money after they are misled by pseudo brokers. It would be of great advantage that he/she looks for a professional broker with assistance from friends and family members (Bodie & Marcus, 2014). The third function of mortgage brokers is matching the lenders and the borrowers. With their clear cut knowledge in financing and real estate, they are able to find compatible borrowers for the right lenders (Bodie & Marcus, 2014). He/she acts as a link between the two.
He collects all the necessary information and paperwork from the client. He then takes the necessaries to the lender for verification and approval. The fourth function is that mortgage brokers play a crucial part in marketing and selling mortgage loans (Reed, 2007). They tirelessly work to attract consumers into taking loans with the institutions of their affiliations. This is due to the fact that they earn their living from the deals they make. They may either get fess from the client directly as a payment of assisting them or may get paid by the lending firm itself.
The lending firms pay brokers in commission. Therefore, the more you bring in many borrowers, the higher the commission earned. The fifth function is the estimation of the risk involved in a mortgage loan deal. They update themselves with the prevailing market trends in the field of real estate’s (Reed, 2007). This is because it takes a lot of intelligence and knowledge to lead a client into getting a loan from a lending institution. Similarly, the lending institution faces the risk of the failure on the part of the borrower to pay back the loan.
It is the role of the broker to ensure that the risk involved on either party is of minimum nature. It is his role to screen the potential lenders on his/her credibility and eligibility in accordance with lending rules of the lending institution. With the knowledge of the information pertaining to the borrower, the broker is able to advise the bank on the way forward. He is in position to give information on the save amount that a borrower can access from the lending institution on the grounds of financial capability and ability.
This ability is assessed on the basis of how much property the borrower has. The history can be accessed from the bank where he has been depositing, lending or withdrawing his finances. The better the financial history is, the more the amount the borrower is likely to access for his mortgage loan. On the other hand, clients with a poor financial history which is questionable are likely to either be unable to access mortgage loans or are able to secure just a little amount.
It is advisable that if an individual is intending to borrow a mortgage loan, he should keep a remarkable financial report on how he deals with his finances. The sixth function of the mortgage broker is that of making the borrower understand the legal perspectives of the lending activity (Madura, 2012)). He ensures that the borrower is aware of the applicable terms and conditions. It is vital that the borrower understands all the necessary legal actions involved before applying for the loan.
Failure to do this, the client may wake up to a new day surprise that he/she has violated terms and conditions of the mortgage loan agreement. The legal knowledge is also vital for future deals that the client engage himself with. If he decides to enter into a similar mortgage loan deal in future, he will already have the necessary knowhow and what he will need to do is to jog himself to the current market trend. By so doing, he will be good to go into the deal and navigate through it successfully. In conclusion, brokers play pivotal roles in the process of lending mortgage loans.
Their role is of much significant. Without them, many borrowers would not be able to secure mortgage loans (Reed, 2007). Of great caution is the danger involved in engaging into a deal without a smart understanding of the legal proceedings which are involved. This can be disastrous because of engaging in a transaction which will later get the borrower with surprise upon violation of terms and conditions involved. Similarly, the brokers are of great importance to the lending firms in establishing credible borrowers.
References Bodie, Z., Kane, A., & Marcus, A. J. (2014). Investments. Madura, J. (2012). Financial institutions and markets. Mason, Ohio: South-Western Cengage Learning. Pizor, A. G., Carter, C. L., Twomey, T., Cohen, A. I., & National Consumer Law Center. (2012). Mortgage lending. Boston, MA: National Consumer Law Center. Reed, D. (2007). Your successful career as a mortgage broker. New York: AMACOM. Reed, D. (2010). Decoding the new mortgage market: Insider secrets for getting the best loan without getting ripped off. New York: AMACOM. The Mortgage marketplace.
(1900). Bethesda, Md: Publicity Consultants. Appendix Figure 1: Showing historical mortgage rates over time Figure 2: Showing the different mortgage lenders