For most prospective investors or residential buyers, the route to a mortgage loan typically begins with a bank or credit union – the tried and true way to finance a property purchase. But as the loan process becomes more complex and buyers with iffy credit remain spooked about even starting the process, enter the mortgage broker – an individual who claims to make the process easier and save the pain of repeated rejections. If reputable, these individuals may be able to help those with less than stellar credit get a loan. But as in other areas of the housing market, users of these services must be wary of scams and fraud.
What does a mortgage broker do? This individual works with many different lending institutions to find the best rates and loan options for each borrower. That means that in some cases they have access to lenders and loan sources that aren’t available through banks, making it possible for someone who’s been turned down by the bank for credit issues to find an alternative form of funding.
Advocates of mortgage brokerage point out banks operate on only one set of underwriting guidelines and can only offer the bank’s own menu of loan options. There often isn’t much room for flexibility and once a borrower is declined, there are no options except to try another lender, starting the loan process all over again every time.
Credit unions, like banks, offer a range of loan products, often at very attractive rates for their members. But the virtue of credit unions – their small pool of members and in-person service—nay work against a borrower on the bubble. And these institutions may not be work easily with investors who are applying for a mortgage on rental property rather than a personal residence.
Because mortgage brokers have access to far more lenders and loan packages than borrowers can access, a responsible broker may be able to save money. But anyone can claim to be a qualified broker with extensive contacts with multiple loan servicers, charge eager borrowers a hefty upfront fee and vanish without providing any services at all. Although mortgage brokers are frequently former bank loan professionals or real estate agents, there’s no established set of qualifications for the profession. That opens doors for anyone claiming to offer this kind of service.
The housing market is home to a variety of frauds and scams, many of them involving services, advisers and brokers. For investors seeking financing fur income property, it’s wise to keep n mind Jason Hartman’s recommendations to get educated about investing and take the advice of qualified and experienced professionals. (Top image:Flickr/gorfor)
The Heroic Investing Team