What is a Mortgage Broker?

A mortgage broker is a financial intermediary who acts as an intermediary between borrowers seeking mortgage loans and lenders who provide them. Mortgage brokers help individuals or businesses find and secure loans that best suit their needs from various lenders. They do not lend money themselves but instead work with multiple lenders, including banks, credit unions, and other financial institutions, to find competitive loan options for their clients.

Mortgage brokers typically have a deep understanding of the mortgage market, including knowledge of various loan products, interest rates, and lender requirements. They work closely with borrowers to assess their financial situation, help them understand their options, and guide them through the mortgage application process.

Essentially, a broker applies a set of filters via their knowledge to determine:

Which lenders will approve you
What features you will benefit most from
And from the available loans, which will be the most economic for your individual circumstances

In exchange for their services, mortgage brokers usually receive a commission from the lender upon successful placement of the loan.

Two Red Shoes does not charge a fee to find you a great home loan. We have the best job in the world and we don't have to charge you a fee.

Here's a step-by-step guide to using a mortgage broker, along with some tips on what to look out for to find the best one:

Determine Your Needs and Budget: Before contacting a mortgage broker, assess your financial situation, determine how much you can afford to borrow, and what type of mortgage you're looking for (e.g., fixed-rate, variable-rate, split loan, etc.) and also identify (and often help you apply for) any available schemes such as First Home buyers assistance.

Research Mortgage Brokers: Look for reputable mortgage brokers in your area. You can start by asking friends, family, or colleagues for recommendations. Additionally, you can search online or check with local industry associations for qualified brokers.

Interview Multiple Brokers: Contact a select few brokers over the phone. During these conversations, get a “gut feel” for who you’d like to work with, ask about their experience and qualifications, and inquire about the types of lenders they work with.

Provide Financial Information: Once you've chosen a broker, you'll need to provide them with detailed information about your financial situation, including income, assets, debts, goals and credit history. This will help them determine the most suitable mortgage options for you.

Review Mortgage Options: Based on your financial information and preferences, the broker will present you with various mortgage options from different lenders. Take the time to review and compare these options, including interest rates, terms, and fees.

Ask Questions: Don't hesitate to ask your broker any questions you may have about the mortgage process, the loan options presented to you, or any other concerns you may have. A good broker should be transparent and willing to address your inquiries.

Choose a Lender: Once you've selected a mortgage option that meets your needs, the broker will help you submit your application to the chosen lender. They will also assist you throughout the approval and settlement process and even afterwards.

Settle the Loan: After your mortgage application is approved, the broker will coordinate the settlement process with the lender and ensure that all necessary paperwork is completed accurately and on time.

After Settlement: Your broker is best positioned as your first point of contact for many questions or changes that you may want to address – such as switching to a different loan type or making an increase to the loan. They can continue to help you assess your situation and recommend when it is time to refinance. They will also keep an eye on your interest rate with your assistance moving forward so you can avoid the “loyalty tax”

The best mortgage broker is one who is available to you long after settlement and offers ongoing care services such as annual reviews and answering all of your ongoing questions.

What to Look Out for in a Mortgage Broker:

Experience and Reputation: Look for a broker with a solid track record and positive reviews from past clients. Experience and reputation are indicators of a broker's expertise and reliability.

Lender Network: Make sure the broker has a wide network of lenders, including banks, credit unions, and non-traditional lenders. A diverse lender network increases your chances of finding the best mortgage terms.

Transparency: A good broker should be transparent about their income, the lenders they work with, and the mortgage options available to you. You’ll be provided with a legislated document that sets this all out very clearly.

Communication: Choose a broker who communicates effectively and promptly throughout the mortgage process. You should feel comfortable asking questions and receiving updates on the status of your application.

Personalized Service: Look for a broker who takes the time to understand your unique financial situation and tailors their recommendations accordingly. Avoid brokers who use a one-size-fits-all approach and do not consider your individual needs.

License and Credentials: Ensure that the broker is licensed and registered with the appropriate regulatory authorities. You can verify their credentials through state licensing boards or industry associations.