Is a mortgage broker the right choice?

Mortgage BrokerMagnifying glass

With the Royal Bank of Canada's March 7 announcement that home prices are softening and overall affordability is on the rise, now is a good time to buy a home in Canada.

Some areas of the country are proving to be more desirable to homebuyers than others. The Canadian Real Estate Association predicts sales of existing homes will be up 5 percent in Nova Scotia this year, improving on gains of 2.8 percent last year. One area mortgage broker took advantage of the trend, selling 305 mortgages worth $62 million in 2011, reported the Chronicle Herald.

But how can Canadian homebuyers know which market – and which mortgage – is right for them? And is a mortgage broker the right way to go?

Mortgage brokers serve as a buffer between banks and borrowers, helping homeowners qualify for home loans, and helping determine which mortgages they can afford. Brokers can compare rates at a variety of institutions, and often have access to wholesale mortgage rates.

But anyone considering working with a mortgage broker should take some preliminary steps and gather as much information as they can before committing to a deal.

Arm yourself with knowledge and prepare some questions about the different types of mortgages for a prospective mortgage broker. This can include inquiries about the pros and cons of fixed rate and adjustable rate mortgages, origination fees and discount points, or prepayment penalties.

The rules regarding prepayments in Canada have recently changed. By doing some advanced research, consumers can make sure their brokers are up to speed on the current state of the mortgage industry.

Ask about fees and make sure your broker can explain what each one of them is for. Don't enter into an agreement you don't fully understand. Also, be sure to read through any documents a mortgage broker asks you to sign.

While the vast majority of mortgage brokers are honest businessmen, there are still some who are out to scam vulnerable clients. Avoid getting swindled by checking a broker's reputation with consumer protection bureaus. The Office of Consumer Affairs has information for consumers to help them identify fraudulent businesses and avoid being taken advantage of.

If a mortgage broker doesn't seem like the right choice, there are a number of ways to compare rates and find suitable mortgages online. Homebuyers can also visit banks and other lenders directly to discuss their options.

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