How do you find the Right Mortgage Broker?
You’ve decided to buy a home so you need a local competent, trusted advisor at your side.
How do you find a great mortgage broker? Here are our ‘pro tips’ for finding an essential partner for financing the most valuable asset you own. Since every mortgage broker is a unique individual with different experience, knowledge, communication styles, financing specialities, and values, a recommendation by a friend or family member may not work best for you. You need to find a broker predisposed to work well with you, who has a complementary working style.
1. Ask for a referral, but take referrals with a grain of salt
There are a lot of mortgage brokers out there. So, how do you choose? Go ahead and ask your friends for a recommendation, but don't feel pressured into picking a broker purely because of a friend’s introduction. First of all, your friend is likely to be recommending them based on a single transaction. Secondly, just because they work well with your friend’s communication and negotiation style, it doesn’t mean that they’ll work well with you. Plus, underwriting mortgages is done differently depending on the region, property type, sources of income, and how the property is used. You need a mortgage broker who is familiar with the local differences and has had recent success getting approvals for someone like you. A skilled mortgage broker doesn’t just get you a competitive mortgage rate; they help you qualify for more money and avoid lenders with higher fees and penalties. They also know which lenders can get you an approval the quickest!
So, when you ask friends for a recommendation, we suggest you ask someone who works in the same industry as you. That’s because the mortgage broker who did a great job with their income confirmation documents will likely be able to sort out your situation easily if you have similar income sources.
2. Try the Match Finder App by Mortgage Sandbox
Mortgage Sandbox developed the Match Finder app to match Canadians with local, pre-screened mortgage brokers and realtors based on shared interests and complementary working styles. We believe these aligned values lead to better working relationships and a more successful home buying experience. Our algorithm finds local values-aligned brokers who are predisposed to work well with you and better able to understand your priorities.
Thinking of buying a home? Renewing a mortgage soon? Try it today. You have nothing to lose!
3. Test broker responsiveness
Once you have two or three potential brokers, email them or call their office, then sit back and wait. This is your first test of a key component: how responsive will your agent be? Ideally, you should get a call back that same day.
“If it takes longer than four business hours without a decent explanation, I would be cautious,” says Alex Mackenzie, a North Vancouver realtor. Imagine if you are near completion and need your pre-approval turned into a final approval. You don't want to be left in limbo by your broker. You want to know they’ll be there for you when you need them. Additionally, the speed and clarity of their communication is a good indicator of how they treat their clients in stressful situations. You don’t what someone who will ‘ghost’ when the going gets tough.
4. Probe their experience and style
Your initial conversation with a prospective mortgage broker should be like any job interview: Don’t be afraid to ask the tough questions. A good broker should have recently funded deals with a few preferred lenders. They should also have an opinion on the benefits/costs of fixed versus variable-rate mortgages. Settling on a specific interest rate is difficult when they’re giving you the best rate so don’t be put out if they say they need a fair amount of information before suggesting a firm rate. Here are some considerations that change the rate available to you:
Income sources (e.g., salary, commission, business-for-self, contractor, rental).
How the property is used (e.g., primary residence, rental, secondary residence)
Size of down payment.
Purpose of financing (e.g., purchase, refinance, transfer, renewal).
How long you will take to repay the loan (e.g., 25 years, 30 years, 35 years).
Size of pre-payment penalty if you break a ‘closed’ mortgage contract (i.e., small, medium, large, jumbo).
How quickly after the approval you MUST fund the mortgage (30, 45, 90, or 120 days).
Request for pre-approval before finding a home or final approval after the offer is accepted.
More factors change which mortgage rate will be available to you and how much you can borrow, but the list above illustrates why lenders usually advertise their ‘best rates’ and not a rate that you will likely get. People love ‘click-bait rates’ so lenders continue to use them in their marketing.
We’ve come up with the following questions you should ask your prospective mortgage brokers:
Q1. Tell me about the last three deals you funded.
This question will test their range of financing experience. You want them to tell you:
the type of property the financed (detached house or condominium);
the sources of income the borrowers had (salaried, self-employed, or other);
the type of financing they needed (CMHC insured, uninsured, niche private lender),
what was the mortgage rate on those deals;
and how are the early repayment penalties calculated on those mortgages.
Compare their answers and also assess how well their recent clients match your situation. You will need to tell them about your circumstances if you want them to give you their best answers.
They will likely use some industry jargon because they live and breather mortgages every day, but always ask them to explain any terms you don’t understand.
Q2. Which are your three preferred lenders?
Brokers get bonuses and discounts from lenders as a reward for concentrating all their business with a few lenders. Be aware that the broker will have a bias toward using one of these lenders because:
All things being the same, the lender will pay them a bigger commission.
If they have high ‘status’ with that lender then the lender may unlock special lower rates.
Ask about why they like these specific lenders, which lender they believe will best suit your financing, and why.
Q3. Can you tell me about the different types of variable-rate mortgages?
There are Different Types of ‘Variable’ Interest Rate Mortgages. The Standard Variable Rate Mortgage is most common, but there are benefits to the other kinds.
Learn more so you can test the broker’s knowledge. The type of mortgage you get will depend on your situation, priorities, and homeownership goals. Your broker mustn’t be a “one size fits all” professional and can find the best ‘mortgage package’ for you.
Q4. Can you tell me about the different ways that lenders calculate mortgage pre-payment penalties?
There are three different calculations for ‘Penalties for Early Mortgage Repayment (Prepayment), and the Big 5 Banks usually apply the most expensive version.
If you chose a closed mortgage you may be charged a penalty if you pay it off too quickly. Whereas, an open mortgage allows you to pay back as much as you like, whenever you like.
Q5. What is the maximum I can afford?
They should explain their assumptions. Some lenders let you take longer to repay, some give you more credit for rental income, and others have lower rates. As well, they have to make assumptions about heating costs, maintenance costs, and taxes. All of these factors influence your total home buying budget. Use our calculator to get a baseline budget that you can use to evaluate the broker responses.
Q6. Can you provide me with a checklist of pre-approval and final-approval documents you will need for the type of property that I’m looking for?
This gives you an idea of how organized the broker is. In truth, there is no one-size-fits-all checklist but how they respond to this question will give you an idea of how they like to explain complicated concepts to their clients and how well prepared they are to handle the work you give them.
Downloadable Broker Interview Questions
We’ve transcribed these questions into a pdf that you can print and fill out as you interview potential brokers. We hope this will help you compare brokers and select the best person for your unique needs.
Mortgage Brokers aren’t free
Mortgage Brokers are usually paid a commission by the lender, not the borrower, so their services aren’t ‘free’. Usually, you get what the lender pays for.
You would never go to a car dealership and ask for the cheapest car on the lot. You don’t want cheap, but you do want good value for your money. The same applies to mortgage packages.
If a mortgage broker significantly discounts the mortgage rate (the price) then they will get very little compensation for their work. That means they need to work with hundreds of borrowers to make a living and it also means they can’t give you their undivided attention to prevent something from going wrong, and they can’t spend much time ‘stick-handling’ your financing if they’re juggling thirty other deals.
Every lender posts their rates at which mortgage brokers make a full commission. For every 0.05%, you negotiate down from that posted rate, the mortgage broker loses 20% of their commission. Instead of asking for a discount on the lender rates, you should ask them to find you the best lender deal for your financing priorities.
If they’re good at what they do, they will get you the right balance of all of the financing features to suit your situation and they should be able to do it while still earning a full commission.
To fully understand mortgage broker commissions and the trade-offs, check out our full report on broker commissions:
Conclusion
When you are buying your most valuable asset, you need a great broker. You want someone who shares your interests and values and is an active broker in the area. Taking a little extra time to find the right broker will lead to a better working relationship, a less stressful selling experience, and ultimately a better financing package for your home.
[Insert Find a Match Ad]
