In general, a lot of work goes into buying a house. An experienced and competent loan consultant will be able to take you through the lengthy and confusing paperwork while finding the right home loan with the best terms and rates.
A loan consultant is a middleman who is paid a commission to find the right match between the borrower and the lender (banks). However, many people, especially first-time homebuyers, are only vaguely aware of what they do. Worse, they are often mistaken for loan lenders or BFFs you can call anytime.
Here are a few things your loan consultant wishes you knew (and should stop harassing them about).
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What does a loan consultant do?
But first, before we get into that, let’s look at and adequately understand the role of a mortgage broker. A mortgage broker, also known as a loan consultant, is essentially a middleman you hire to help you by matching you with the best mortgage available.
Part of their job involves working with numerous lenders to identify the most suitable mortgage for your circumstances. They handle much of the administrative work associated with your mortgage application, such as submitting all necessary documents.
This allows you to focus on other matters while they diligently screen out mortgages with potential hidden fees or excessive charges.
So now that we understand what mortgage brokers do, let’s have a look at the four things they wish you knew.
1) They can’t approve your loans
Mortgage brokers do not work for a bank and cannot approve your loan.
For those unacquainted with the trade, the primary role of a mortgage broker is to advise you on the best loan, get your hefty paperwork together, and ensure that you meet the loan program guidelines and conditions that the banks offer.
It is the bank’s loan officer who will ultimately decide whether or not you qualify for the loan. So, if the bank has rejected you, it’s not your broker’s fault.
2) They’re not your lunch dates
Many brokers work on a 100% commission basis, so time is money. It is undoubtedly not very cost-effective to work with people who are not serious about buying a place in the immediate future.
To avoid going on a wild goose chase, many brokers will ask you upfront for the property price and your income to ensure you are eligible for a loan of that size.
Qualified clients who can put down and understand a healthy debt-to-income ratio will be at the top of their list.
They won’t be too motivated to do much for you if you don’t look serious.
3) They don’t decide how much you can borrow
Depending on their lending policy, banks may finance anything between 80% and 90% of the property’s value. Only specific housing schemes from the government or banks for home ownership initiatives may offer 100% financing.
This is usually for first-time owners or those who qualify to buy if your income and other factors meet 100% loan eligibility criteria. Generally, most house buyers must fund at least 10% of the purchase by cash.
The problem typically arises with transactions involving sub-sale properties when a disparity occurs between the seller’s asking price and the property’s actual market value.
For example, the selling price of a house might be set at RM600,000. However, the actual market value of the house could hover at just above RM500,000.
When this occurs, the buyer will have to fork out significantly more for the down payment, and a mortgage broker cannot help to increase the amount of financing a buyer can get.
4) If you’re refinancing, they can’t speed up the disbursement process
Many refinancing people expect to get their cash in a week or two. The back-end and legal work that entails refinancing could take up to four months.
The duration it takes the bank to disburse the cash will depend on several factors. This includes the type of loan, the day of the week the loan closes, and whether the borrower refinanced with the lender who approved the original mortgage matters.
At the end of the day, the most essential thing borrowers should know about mortgage brokers is that they can only do so much for you. If you walk in with a rock-bottom credit rating and a trail of unpaid bills, no broker can convince the banks to give you a reasonable loan rate for a low-risk client.
Need a home loan? Check out the latest rates here.
This article is a collaboration between iMoney and IQI Global. iMoney is a personal finance company that operates a comparison platform. It was founded in 2012 and has since worked with over 50 financial services partners to help build consumer financial literacy.
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