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Everything to Know About Property Valuation and Mortgage Brokers

In order to determine if a particular property is a worthy investment, financial lenders use a process known as a mortgage valuation. The purpose of a mortgage valuation is to accurately compare a property’s price with similar homes in the neighborhood and ensure that the amount of money necessary to borrow is less than the home’s actual value. It also works as a checklist for both the condition and location of the property and finds any predicaments waiting to happen. As a potential homeowner, the mortgage offered to you will largely be based on the residential property valuation results since the financial lender will not lend you more money than what the property is worth.

Valuation vs. Survey

Even though a property valuation is often called a survey, it doesn’t go into as much detail as an actual survey. Typically, you will get a copy of the report but might discover that it’s somewhat brief and doesn’t cover a great deal of detail. The report itself arrives at the sum of the valuation by taking into account such variables as the location, condition, age, and the asking price of comparable homes in the vicinity.

In spite of the lender being the key beneficiary of the valuation, you are still responsible for covering the cost. Expect to pay for the privilege of commissioning an official report that you don’t have the right to actually read. Also, based on the value of the property, the cost of the valuation may increase. Some financial lenders might reimburse the valuation cost once the mortgage transaction is completed, but not all of them. 

And, if you were wondering about the cost, you should expect to pay a few hundred dollars for a basic valuation.

How a Valuation Benefits a Potential Homeowner

As a potential homeowner, you benefit from the valuation in a variety of ways. If the target property turns out to be a money pit, then it’s much better to know about it now rather than later after you’ve signed on the dotted line. 

Think of the valuation as a tool that can find certain flaws or even major structural issues with a home that weren’t obvious at first glance. If the property fails due to some reason, the lender will inform you regarding the details why. On the other hand, if the valuation is a success, you then have another vantage point of the asking price of the property.

A basic residential property valuation is the standard prerequisite you’ll need to secure a home mortgage loan. In the end, more than half of all potential homebuyers rely on the property valuation as the only objective expert opinion on the condition of the home that they are considering buying.

Can a Mortgage Broker Get You a Better Loan?

If you’re thinking about buying a house, you may have talked to a buyer’s agent to investigate properties in your area. Realtors are helpful with showing properties and finding you the right house, but they don’t usually help with the loan process. You might want to consider contacting a mortgage broker to help you with the hardest part of buying a house – getting the loan.

What is a Mortgage Broker?

A mortgage broker is a middleman between you — the borrower — and the lender. A mortgage broker’s job is to match the borrower with the right lender who will offer the best interest rate and loan term. In the past, most banks and lenders have sold their own mortgage or investor home loans. In today’s competitive real estate market, mortgage brokers sell most mortgage loans for banks and lenders.

property valuation

What Does a Mortgage Broker Do?

Duties of a mortgage broker can vary by location and state laws that regulate their business, but this is a general overlook:

  • Solicits clients (borrowers) by marketing and advertising
  • Assesses the borrowers’ credit history and income
  • Works to find a mortgage loan that fits the client’s qualifications
  • Works with the lender to pre-qualify the borrower or investor home loans
  • Gathers all necessary loan information from the borrower (bank statements, income verification)
  • Completes the lender’s application for the borrower and submits it for approval
  • Works with the borrower to explain legal disclosures and loan terms

The goal of a mortgage broker is to save their client as much money as possible by pairing them with the best lender for their particular loan needs. The borrower relies on the knowledge and advice of the mortgage broker to find the best loan. The lender relies on the mortgage broker to make sure the borrower is qualified to meet the loan terms.

In the United States, the mortgage broker industry is heavily regulated and closely monitored by ten federal laws, 49 state laws, and five federal agencies. Most states require mortgage brokers to be registered with the state where they do business. This makes them liable for fraudulent practices for the life of the loan. Such fraud is punishable by prison or revocation of the mortgage license.

Advantages of Working With a Mortgage Broker

  • The borrower will have multiple lenders to choose from
  • Suitable for first-time homebuyers who need mortgage help and advice
  • Good for homebuyers with less than perfect credit
  • A mortgage broker works for the borrower, not the lender
  • Assistance with required paperwork, loan application, and legal terminology

Do mortgage brokers get paid? Yes, by the lender, not the borrower, and only if the loan closes. As you can see, a mortgage broker has a vested interest to get you, the borrower, the best deal to close the loan. If you’re buying a house, talk to a mortgage broker before you proceed with a loan.

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