Are you looking for a loan? Need a new car, or researching purchasing your first home? There are a few ways that you can get the money you need. You can apply for loans online, or you can find a loan broker in your area.
There are benefits and disadvantages to each, and loans can be overwhelming. Mortgages alone have more terminology than a grade school vocabulary book. Words like APR, balloon, points, ARM, amortization and escrow will fly at you like ammunition. You’ll want to duck under your covers until it’s all over.
Some people choose to do it themselves, and others choose to hire a loan broker. The choice is yours; let’s look at the pros and cons of both methods.
Securing an Online Loan
For the purpose of this article, we’re going to talk about mortgages. You can probably find a loan broker in your area who will assist you with car notes and other types of loans. But mortgages are the most common.
It’s simple to apply for and secure a mortgage online without a broker. But it certainly helps to know what you’re looking for. Are you low income? A first time buyer? Do you know what kind of interest rate you qualify for?
If you already know exactly what you want, great! Go shopping! There are dozens of companies which will be happy to take your application. Traditional banks sell mortgages, as do companies like Quicken and Citi. Feel free to shop for the best rate, because FICO ignores mortgage inquiries made in the 30 days before scoring.
Once you find a loan you like, the rest is just a lot of paperwork. Be sure you’ve got your taxes and your bank statements in order. You’ll submit these to the loan company, usually via fax.
You can usually save a lot of money by using an online loan provider. Brokerage fees are generally lower, and the systems are largely automated. That is to say, you’re not paying someone’s salary with fees you incur. But you won’t get the personalized service that a brokerage will provide you.
Have you shopped for a while but are still confused about mortgages? Maybe it’s time to think about finding a loan broker in your area.
Using a Broker to Get a Loan
If you’re like most people, you don’t know exactly what you want in a loan. You may not know what you qualify for. And you may just not want to deal with all the paperwork associated with applying for a loan.
When you begin shopping for a mortgage, you’ll think there are about ten thousand thirty different kinds of loans. There are FHA loans which are through Housing and Urban Development. There are FSA loans for certain parts of the United States. These come through the USDA. And in addition to all of the government and private loans, there are conventional loans through bankers.
A good loan broker will be able to guide you through all of these options. She knows her industry and knows what’s available. And after interviewing you about your situation and your finances, she can direct you to the best loan for you.
And the service doesn’t end there. After you agree on which type of mortgage you’re interested in, your loan broker will apply for you, will submit all required paperwork and will hold your hand through the process until you close.
Having a loan broker certainly takes a lot of the confusion out of buying a home, but it comes at a price. Loan brokers will usually collect 1-2% of the total value of the loan you get. That can add up! You also may be responsible for administration fees and other payments. Be sure that you know what your broker charges before signing your paperwork.
Furthermore, it’s going to be important that you check out your loan broker before you hire her. Always interview her, but also ask friends for recommendations. Complaints about brokers are registered with the Consumer Financial Protection Bureau, so check there, too. Loan brokers are a great help in the loan process, but always make sure they’re licensed and legitimate.
Find a Loan Broker in Your Area
The internet is a wonderful tool for finding a loan broker in your area, but it can muddle the process as well. There is such thing as too many options. That said, a simple internet search probably won’t be your best bet.
To begin, always ask friends for recommendations. As an example, maybe you belong to a local group on a social media platform. Ask other members of that group who they used as their mortgage broker. People love to share their stories; buying a home is an exciting event.
Next, you’ll want to check out that recommendation with both the CFPB and the agency which serves your state. This is usually your state’s Commissioner of Banks. You can also look up your broker on the Nationwide Multistate Licensing System, or NMLS.
Finally, interview your loan broker. You’ll want her to answer a few questions about the service she provides, about her fees and about her ability to secure your desired loan. But you’re also going to want to feel comfortable with her. If you feel uncomfortable or uneasy with your loan broker, consider it a red flag and continue your search elsewhere.
There are plenty of websites which can help you to determine the right questions to ask your loan broker. As her rates, her points and her fees. Ask her if she will lock in a mortgage rate for you. Ask for a Good Faith Estimate, which is an estimate of the fees you’ll pay during the home buying process.
It’s ultimately your decision whether you hire a loan broker or you choose a do it yourself approach to home buying. Weigh the pros and cons of each carefully. It’s important that you feel comfortable with your decision, so that you can move forward with confidence.