What to Look for in a Mortgage Advisor
Certified Financial Counselor
Ashley Altus is a writer and certified financial counselor through the National Association of Certified Credit Counselors.
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- What’s a Mortgage Advisor?
- How Mortgage Advisors Work
- 4 Benefits of Working with a Mortgage Advisor
- 4 Disadvantages of Working with a Mortgage Advisor
- What to Look for in a Mortgage Advisor
- How to Find a Mortgage Advisor
- Should everyone use a mortgage advisor?
- Mortgage Advisors Can be Your Advisor in the Home Buying Process
- Bottom Line
The mortgage process can be overwhelming, especially for first-time home buyers. You may consider enlisting the services of a mortgage advisor to walk you through the home loan process.
While it’s not required to use a mortgage advisor, as many homebuyers can find a lender themselves, mortgage advisors can help home buyers in many ways. Think of them as a one-stop shop to access multiple loan options, communicate to lenders on your behalf, and provide industry expertise and knowledge.
What’s a Mortgage Advisor?
A mortgage advisor is a mortgage loan officer. They can also be called mortgage consultants, mortgage loan originators, loan originators, or even just “Loan officers.” The title of the position varies by company but their core functionalities are the same. Their primary role is to help consumers find a mortgage that matches borrowers’ financial profile and home financing needs. They compare rates and terms of different loan types and programs on behalf of the homebuyer to ensure they are receiving the best program or product to meet their financing needs.
They are licensed representatives and generally work in two ways:
- They work for one bank or mortgage company and can only access the mortgage rates and programs that are available to that bank or mortgage company.
- They work independently or for a mortgage brokerage but can have access to a panel of lenders that they have chosen to work with.
How Mortgage Advisors Work
Mortgage Advisors partner with borrowers to help in the home buying process, from the earliest stages of prequalifying for a home all the way through loan closing. They’ll interact with the real estate agent, processor, underwriter, and closing agent to make sure the loan closes in a timely fashion.
Here are four different areas in which a mortgage advisor may become involved during the home buying process.
1. Finding The Right Mortgage Offer
Mortgage advisors gather a borrower’s information for assessing the borrower’s ability to secure financing. They then gather loan options from various lenders for the borrower to consider, while prequalifying the borrower for a mortgage with those lenders at the same time. With a one-stop-shopping experience, mortgage advisors can give the borrower access to many different loans and rates.
2. The Loan Application
The loan application process is the same whether or not you choose to use a mortgage advisor or work directly with a lender. During this stage, advisors collect detailed information on a borrower’s finances including their income streams, assets, employment documentation, debts, expenses, and credit report, and help the borrower submit a mortgage application to the lender.
3. Loan Processing
Mortgage advisors do not approve loans. After collecting a borrower’s financial information, an advisor will help the borrower secure a competitive rate. Then, the lender verifies the accuracy and comprehensiveness of the buyer’s financial information. Once the information is confirmed, the loan is sent to the lender’s underwriter for approval.
4. Closing the Loan
Closing the loan refers to the final step in the mortgage journey. Throughout the transaction, the advisor communicates with the borrower and the lender. The parties involved in the mortgage loan transaction sign all documents during this step.
Read all the documents thoroughly to understand the terms and conditions for the loan. Now is the time to ask any last minute questions to ensure the loan is exactly what was agreed upon. Once everything is signed, you’re responsible for the mortgage. Advisors are paid at the close of the loan.
4 Benefits of Working with a Mortgage Advisor
With the right mortgage advisor, the home buying process can run free of hiccups. There are a couple of reasons why a mortgage advisor may be the right partner for you as you look for a new home.
1. Guidance During the Lending Process
Mortgage advisors can give advice to borrowers about different mortgage products. They help break down the complexities of the lending process and educate borrowers on how to compare loan options.
An advisor can give borrowers tips for creating a strong application. They provide their expert opinion about the loan amount borrowers can afford, which could help your chances of getting approved for a loan.
2. Access Rates You May Not Get on Your Own
Mortgage advisors have a wide variety of mortgage products at their fingertips. Advisors can use local, state, and national lenders to find you a good deal. They can also recommend lenders who may best suit your niche financial situation, such as having a bad credit history or being self-employed.
3. Save Time and Find a Loan Quickly
Mortgage advisors can easily shop around for different mortgage rates on behalf of their clients. This can save home buyers time and effort, because you won’t have to deal with several lenders individually.
4. Knowledge of the Local Market
If you’re planning to move to a new city, you may not know much about the market you’re moving into. A mortgage advisor can lend their expertise when it comes to navigating the local lending landscape.
4 Disadvantages of Working with a Mortgage Advisor
Mortgage advisors aren’t for everyone. There are some drawbacks borrowers can encounter when working with an advisor.
Mortgage advisors are not free. Advisors are typically paid a loan-specific fee for their work, according to the Consumer Financial Protection Bureau. Even if you don’t pay an advisor upfront, borrowers will pay to work with a mortgage advisor one way or another, as the lender may pay the mortgage advisor a commission, which is inevitably built into the cost of your loan.
If the advisor is charging you for their services, they can’t receive additional payment from the lender. Either the borrower pays the advisor or the lender, but not both.
2. You May Not Get the Best Deal
Even if you use the services of a mortgage advisor, it doesn’t automatically mean you’re getting the best rate on the market. It may just be the best deal the advisor could get from the lenders they work with.
3. Conflicting Motivations
Advisors may be motivated by loan amount or loan quantity. In a cut-throat market, advisors may be trying to close as many deals as possible and not provide the in-depth service that borrowers want.
4. Limited Lenders to Choose From
Not all lenders work with mortgage advisors, so you could be missing out on certain loans. The loan the advisor finds will impact your finances for the next 10, 20, or 30 years.
What to Look for in a Mortgage Advisor
Every mortgage advisor will provide their clients with a different experience. For that reason, you should consider several prospective advisors before settling on one. Just like you would shop around for the best mortgage rate, you can also consider inquiring with several mortgage advisors to find the best match, says the FDIC.
You’ll want to find a mortgage advisor that will not only answer your mortgage questions, but give you information about options you didn’t even know about. Having a mortgage advisor who can translate industry jargon can give you the confidence you need to make an informed decision.
With that in mind, here are several factors to review when shopping for an advisor.
With the right mortgage advisor, borrowers should feel as if they have a trusted advisor to help them during the home buying process. When looking for a mortgage advisor, ask questions to ensure the advisor can meet your needs. You can also look at their website and online reviews to gain a better understanding of how they’ve worked with people in the past.
Every mortgage advisor has a different fee structure to receive payment from their services, so you’ll want to discuss their compensation before you decide to work with them.
There are several ways mortgage advisors earn their paycheck, but in general, their fees amount to between 1% and 2% of the loan amount, according to Realtor.com.
They may earn commission which is determined by the loan amount, charge clients a flat fee, or work as a salaried employee of a firm.
Most importantly to know, advisors aren’t allowed to charge hidden fees and are required to be transparent about how they’re paid.
If you’re unsure whether a mortgage advisor is legitimate, one of the easiest ways to find out is to look up the advisor in the Nationwide Mortgage Licensing System and Registry (NMLS). With this free service, everyday consumers can verify if an advisor is licensed in your state.
Another resource you can use is your state regulator, which will allow you to view any disciplinary actions that have been taken against the advisor.
What should I ask a mortgage advisor?
As you meet with and consider mortgage advisors, you’ll want to ask them questions about their experience, background, and services. Here’s a list of questions you may find beneficial to ask advisors when you speak with them:
- How long have you worked as a mortgage advisor?
- How much do you charge for your services?
- What’s your experience in this particular market?
- How long does it typically take your clients to close a loan?
- Do you act as a fiduciary?
- How many lenders do you work with?
- Can you give me a preliminary written estimate for the fees you charge?
- Can you send me a few references or testimonials from previous clients?
- How do you typically communicate with clients?
How to Find a Mortgage Advisor
If you’ve decided to enlist the services of a mortgage advisor, you’ll want to make sure they can provide you a positive experience. The last thing any home buyer wants is an advisor that makes the process more challenging.
Here are a couple places to look for a good mortgage advisor:
Friends & Family
Word-of-mouth is a simple way to find out which mortgage advisors people recommend and which ones they avoid at all costs. Ask the referral what they liked or disliked about their experience with the advisor to see if their advisor may be a good fit for you.
Your Real Estate Agent
It’s likely your real estate agent has a working relationship with several advisors. Ask your real estate agent to recommend an advisor who fits your needs.
While it’s easy to search for a mortgage advisor online, it can be tricky to identify who truly is an advisor, as mortgage advisors may go by many different professional titles. When you find some potential matches, do your research to ensure the company or person offers the services you want.
Your Financial Institution
If you have a good relationship with your bank or credit union, you may want to look for an advisor there. It is important to note, if you do decide to use an advisor at a bank, they likely will only have access to the mortgage products at that particular financial institution. Nevertheless, exhaust all options to find the best deal; it could be right where you do your everyday banking.
Should everyone use a mortgage advisor?
Mortgage advisors aren’t one size fits all. Some home buyers may want more control over the mortgage process, prefer a direct connection to their loan officer, and don’t want to pay advisor fees.
Mortgage Advisors Can be Your Advisor in the Home Buying Process
Borrowers, especially first-time home buyers, who want a partner in the lending process may find the services, support, and guidance of a mortgage advisor worth the cost.
No matter if you choose to use a mortgage advisor or not in your home buying journey, one of the most important things you can do to get the best rate is to shop around and go through all your options. You can compare the rates a mortgage advisor provides with that of a lender.
Ultimately, whether or not to use a mortgage advisor is a personal decision that depends on a borrower's specific needs and circumstances. Before making a decision, it's important to consider both the benefits and drawbacks and research different advisors to find the best fit.
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