Why Use a Mortgage Broker?
2020-09-18 | 17:41:22
A Mortgage Broker works with multiple lenders and mortgage solutions and is a great resource to have when buying a home, refinancing or checking in on your existing mortgage. Seems obvious right?
It would seem obvious, however; why is a Mortgage Broker a good resource?
- A quality Mortgage Broker is a licenced professional that has good relationships with quality lenders. They know how to analyze a client situation and where to go for a solution. They know what to ask for and how to ensure a client is taken care of.
The key here is that a Mortgage Broker has access to multiple lenders and in most cases are paid by the banks and lenders to place your mortgage with them. If you go to a bank, or a bank rep, they are only selling THEIR product. That’s it, they have no other options. If you don’t fit in that box – they don’t tell you to go across the street to their competitor. What do they do? They’ll tell you to come back in 6 months and see if anything changed. See if anything changed? Really? That’s it, that’s the usual mantra that I hear from my clients. “I went to my bank and they wouldn’t approve me, they told me to just come back in 6 months with no direction. I was referred to you by my friend who worked with you in a similar situation and I am hoping you can help out.”
Now, let me be clear, not every bank rep does this. There are obviously quality bank reps out there. For further clarity, I can’t help everyone. Some situations require time and effort by the client. However; I will help the client set a plan and a path to ensure they can meet their goals - and I can give examples.
Before I get to those examples; every situation is different. You may hear from friends, parents, etc. about how a mortgage should work. This happens A LOT during a transaction. The fact you have to keep in mind, every situation is different and that those people are not licenced to provide mortgage advice. Rules can change, situations can change, and each lender operates differently. You may even work with a friend who qualified to buy a house that is worth $500,000. That friend may make the same amount of money as you and you may only qualify for a purchase price of $400,000. The ability to filter this information out, is really important when working with a trusted Mortgage Broker.
So back to those examples, and I have to limit them here as there are many. So many, I could write these examples until next week. Why? Last year, 22% of the mortgages I provided to my clients were for families and individuals that had spoken to someone else, be it a bank or another broker, and had been told they didn’t qualify, they didn’t qualify for best rates or were simply told that “they didn’t have time to work with their transaction”. That was one person by the way. One client, that when they told me that I was stunned.
One of my favourite examples is a client that came to me because they did not know how, or even if, they could get a mortgage to buy a house. Now, this client did not like my answer. Honestly, they didn’t. I sat with them (when we could sit with clients) and went over their situation. I pull credit, I verify income and spell out a client’s situation and options. I am blunt and honest and sometimes, people don’t like the answer. One thing to remember though, is that Mortgage Brokers only get paid when deals close. For me, I feel why drag things out – be honest with my clients, let them know what’s up, provide options for solutions and let the client decide whether they’d like to work on one of those solutions. So, what happened? This client was told by me that they would qualify with a B lender at best, with interest rates around 5-7% (rates were a bit higher then) and some fees or they may have to go to a Private lender if we couldn’t get a B lender to approve them, with fees. Now, I was confident that we would get a B lender on board, however; I wanted the client to know the good, the bad and the ugly. So, what did the client do? They called someone else. I remember following up with this client to see what they thought of our meeting, and they told me they were going to talk to someone else as they felt they could do better. How did I react? I told them that they were entitled to go and get a second opinion and that I would be available when they needed me. Now, keep in mind, I was confident where this file would end up. I forget the exact length of time that passed, however; one day this client called me back and said “John, we talked to another broker and they told us there was no way we could get a mortgage and buy a home for our family. You said that we could, are you confident that you can do this for us.” Yes, I was. And the client moved forward and put in an offer, we completed the transaction. Their rate landed in the quoted range at 6.49% and the client was given a plan to improve their situation over time. They’ve already renewed in fact, and their rate went down, they’ve built quality in their home and they refer clients to me because of how honest I was with their situation. I should mention, I am thankful for these clients because they also did something for me. They enforced that my process for providing mortgage solutions is a winning process.
Another example that I have, is more along the lines of someone not being ready. This client to, has already renewed their mortgage and has lived in their home with their family for 6 years now. That’s not the story, the story is that they came to me 3 full years before they were able to buy a home. Do some math and that’s 2011. Rules kept changing around them, life changes took place and the plan changed a few different times. However; they stuck with it, trusted the process and now have 6 years of equity behind them. This client had spoken to their bank previously and had been told the, “come back in 6 months” line, for a few years. What was the plan? There was a plan to, reduce debts, save funds for down payment and increase income (something that really isn’t in control all the time). This client followed our plan and made it happen.
This last example is about someone who was already my client, they came to me after the fact and said, “John, you know our situation and we are grateful you were able to help us with financing. However; I have a debt problem and I need help reducing my debt so that our family can be in a better situation.” Now, you may think – why would you help them if the transaction is already complete? I’m not wired that way. I’m really not, this client asked for help, needed help and I wanted them to be in a better position moving forward. So, what was the plan? The plan was for her husband to make all the bills for the home because he was able to. She was to reduce her credit card debt. She made roughly $35,000 a year at the time and if I recall, had about $33,000 in credit card debt in her name. Before their renewal, she was credit card debt free. Less than 4 years! I told her to write out her revolving debts in order of lowest balance and place the minimum payment beside the balance. Then, set her payments on every card to pay THAT minimum payment and not use the cards. Simply not use them. Then the focus is on the lowest balance. At the end of each month, I instructed her to take whatever extra funds she had and put them on the lowest balance until that card is $0. Then, take the minimum payment from the original chart and add it to the minimum payment on the next highest balance. Then repeat. The idea here is to have her feel the changes happening. By attacking the lower balances, you can see progress. If she had started with the highest balance, she might give up. This is a mistake people make. Less than 4 years later, she was credit card debt free and her family is in a much better financial position moving forward.
So why use a Mortgage Broker? Well, I can’t speak for other Brokers, however; I can say that I provide families financial solutions for their future.
