Before the credit crunch, there was a relatively even split between the numbers of customers that sourced a mortgage via a broker and those that went directly to a bank. Now I think that a majority would consult with a broker first, certainly when buying a new home or where extra borrowing is required.
Before the credit crunch, there was a relatively even split between the numbers of customers that sourced a mortgage via a broker and those that went directly to a bank. Now I think that a majority would consult with a broker first, certainly when buying a new home or where extra borrowing is required. Due to the relative scarcity of loans and the tightened criteria, it now makes sense to have someone who understands which lender is the best fit for their client’s individual circumstances. When speaking with one of my clients recently, it occurred to me that many people may not know exactly what a mortgage broker’s day to day looks like or what steps are involved in getting that mortgage offer arranged for a client. So, I thought it would be helpful to answer the question: What does a mortgage broker actually do?
When a client initially contacts me they generally have a fair idea of what they want. These days, most people will research a topic on the web before approaching a professional for more specific advice. This is one of the reasons I write this blog; at AALTO, we are all about being open, transparent and giving people the knowledge they need and want to make the right choices. Typically a client will approach me with an idea they think is feasible and that they want me to confirm. Sometimes clients are more open and simply want to know where to start and what boundaries or factors they will need to consider. At other times it’s very specific; they have the figures worked out and are just looking for the very best deal for that particular situation. Whichever way the conversation starts, I take diligent notes so I can begin to understand where they are coming from and where they want to go.
Arranging finance is largely all about problem solving. Each client is unique and, similarly, the lenders try to be as unique as regulation and market forces will allow. It’s a matter of balancing the best fit for the client with the cheapest overall option. So, to make it as clear as possible for everyone involved, I begin planning on a blank sheet of A4 paper that I scan and save for future reference. I often draw pictures with arrows connecting to information all over the page, such as where the deposits are coming from, what’s being sold, what’s staying put, and if there are any unknowns. So, when a client comes back to me six months or a year later, I can always jump to their folder and pull up their notes from when we last spoke. When I’m done with this side of the process, known as the fact find, I go away and solve the problem.
The most common problem to solve is how to maximise borrowing. This can be a tricky one. Because lenders are ultimately responsible for deciding what’s affordable, all the guidelines and calculators in the world cannot guarantee an underwriter will rubber stamp a particular loan. The trick is to understand their priorities and the measures they use. For instance, many lenders will look at different incomes in very different ways. If you work a second job, for example, the lender may only take 50% of that income or, if you are self-employed, some lenders take an average over three years, some take an average over two, depending on how the figures look – this can have a big impact on the loan amount generated. After affordability, the type of property can often be another major factor, especially when it concerns By To Let lending. Some lenders lend more than others based on the rent the property is likely to receive and some won’t lend against ex-local authority flats, or flats in blocks over five stories. Experience and knowledge are extremely important for mortgage brokers here as not all lenders fully publish their criteria; the lender might not mention anything about more niche factors and so you have to rely on past experience in order to know what to look for or what to query.
The overall process here is simple though; I always want to find the client the best deal to suit their needs, so if they are looking for a two year fixed rate, I use sourcing software to sort all the available deals by overall cost over two years and start at the top. Some deals I can rule out immediately, for some I have a quick scan of the lender’s website, and for more obscure things I can call the lender direct to discuss. This in itself is fraught with risk because most telephone agents simply read from a script. Often it’s necessary to ask them to consult the underwriters to confirm how a particular factor might be perceived when it gets to the full application stage. To support us, most lenders also assign us to a Business Development Manager, whose role is to ensure we understand where their bank is strongest, to advise on complex cases and to get things moving again if we run into problems. Generally, they will have a broker or underwriter background and so are better placed to understand the situation we are in. Either way, a broker spends a lot of time on the phone! I regularly spend at least two to three hours with hold music in the background, waiting to get through to someone about a particular case.
Once the deal has been picked, the criteria checked and any other factors considered, I report to the client, providing a full quote, and a summary of the factors, costs and potential issues involved in arranging the mortgage. From here, the process is probably more familiar; the first step is to conduct a Decision in Principle which involves a credit check and a basis criteria check, then fees are paid, a full application is submitted and a valuation is ordered. After this, it’s a matter of the broker managing the case through to completion. It is here that some lenders require certain things clarifying, and the reasons may not be immediately obvious to the client. Having a mortgage broker on board who understands the underwriter’s requirements means that they can negotiate the best possible response for you.
So what makes an excellent broker? I think it comes down to knowledge and experience. When you first make contact, an excellent broker should be able to give sound advice there and then, and provide all the figures needed whilst on that first phone call. There should always be some double checking required as nobody can remember everything, but you should get the feeling that the person you are talking to already knows the answers to your questions. An excellent broker should also be able to guarantee you the very best deals available to suit your needs, even if it’s with an obscure lender they don’t have much previous experience with; an inexperienced broker may recommend a lender that is more expensive than others as it may be one they are more familiar with. Initially, you should speak to a few brokers and trust your instincts and go with whoever makes you feel most confident.ed criteria, it now makes sense to have someone who understands which lender is the best fit for their client’s individual circumstances. When speaking with one of my clients recently, it occurred to me that many people may not know exactly what a mortgage broker’s day to day looks like or what steps are involved in getting that mortgage offer arranged for a client. So, I thought it would be helpful to answer the question: What does a mortgage broker actually do?
When a client initially contacts me they generally have a fair idea of what they want. These days, most people will research a topic on the web before approaching a professional for more specific advice. This is one of the reasons I write this blog; at AALTO, we are all about being open, transparent and giving people the knowledge they need and want to make the right choices. Typically a client will approach me with an idea they think is feasible and that they want me to confirm. Sometimes clients are more open and simply want to know where to start and what boundaries or factors they will need to consider. At other times it’s very specific; they have the figures worked out and are just looking for the very best deal for that particular situation. Whichever way the conversation starts, I take diligent notes so I can begin to understand where they are coming from and where they want to go.
Arranging finance is largely all about problem solving. Each client is unique and, similarly, the lenders try to be as unique as regulation and market forces will allow. It’s a matter of balancing the best fit for the client with the cheapest overall option. So, to make it as clear as possible for everyone involved, I begin planning on a blank sheet of A4 paper that I scan and save for future reference. I often draw pictures with arrows connecting to information all over the page, such as where the deposits are coming from, what’s being sold, what’s staying put, and if there are any unknowns. So, when a client comes back to me six months or a year later, I can always jump to their folder and pull up their notes from when we last spoke. When I’m done with this side of the process, known as the fact find, I go away and solve the problem.
The most common problem to solve is how to maximise borrowing. This can be a tricky one. Because lenders are ultimately responsible for deciding what’s affordable, all the guidelines and calculators in the world cannot guarantee an underwriter will rubber stamp a particular loan. The trick is to understand their priorities and the measures they use. For instance, many lenders will look at different incomes in very different ways. If you work a second job, for example, the lender may only take 50% of that income or, if you are self-employed, some lenders take an average over three years, some take an average over two, depending on how the figures look – this can have a big impact on the loan amount generated. After affordability, the type of property can often be another major factor, especially when it concerns By To Let lending. Some lenders lend more than others based on the rent the property is likely to receive and some won’t lend against ex-local authority flats, or flats in blocks over five stories. Experience and knowledge are extremely important for mortgage brokers here as not all lenders fully publish their criteria; the lender might not mention anything about more niche factors and so you have to rely on past experience in order to know what to look for or what to query.
The overall process here is simple though; I always want to find the client the best deal to suit their needs, so if they are looking for a two year fixed rate, I use sourcing software to sort all the available deals by overall cost over two years and start at the top. Some deals I can rule out immediately, for some I have a quick scan of the lender’s website, and for more obscure things I can call the lender direct to discuss. This in itself is fraught with risk because most telephone agents simply read from a script. Often it’s necessary to ask them to consult the underwriters to confirm how a particular factor might be perceived when it gets to the full application stage. To support us, most lenders also assign us to a Business Development Manager, whose role is to ensure we understand where their bank is strongest, to advise on complex cases and to get things moving again if we run into problems. Generally, they will have a broker or underwriter background and so are better placed to understand the situation we are in. Either way, a broker spends a lot of time on the phone! I regularly spend at least two to three hours with hold music in the background, waiting to get through to someone about a particular case.
Once the deal has been picked, the criteria checked and any other factors considered, I report to the client, providing a full quote, and a summary of the factors, costs and potential issues involved in arranging the mortgage. From here, the process is probably more familiar; the first step is to conduct a Decision in Principle which involves a credit check and a basis criteria check, then fees are paid, a full application is submitted and a valuation is ordered. After this, it’s a matter of the broker managing the case through to completion. It is here that some lenders require certain things clarifying, and the reasons may not be immediately obvious to the client. Having a mortgage broker on board who understands the underwriter’s requirements means that they can negotiate the best possible response for you.
So what makes an excellent broker? I think it comes down to knowledge and experience. When you first make contact, an excellent broker should be able to give sound advice there and then, and provide all the figures needed whilst on that first phone call. There should always be some double checking required as nobody can remember everything, but you should get the feeling that the person you are talking to already knows the answers to your questions. An excellent broker should also be able to guarantee you the very best deals available to suit your needs, even if it’s with an obscure lender they don’t have much previous experience with; an inexperienced broker may recommend a lender that is more expensive than others as it may be one they are more familiar with. Initially, you should speak to a few brokers and trust your instincts and go with whoever makes you feel most confident.
