Helping new mortgage brokers get started

Added 13/06/24 - 4 min read

We understand that gathering and developing the knowledge to become a successful mortgage broker can feel overwhelming at first. The Growth Series is a free resource to share with newer members of the team that will help them on their journey.

Let's begin by unpacking the basics:

The broker's Role

You'll act as a trusted guide, liaising between lenders, valuers and your clients. Your expertise and ability to explain and manage the process effectively will ensure a smooth and efficient mortgage application to offer process.

Learn more: The hidden value of broker's advice

Learn more: The value of knowledge and advice

Understanding mortgage types

It goes without saying that helping clients understand which mortgage best suits their needs is a fundamental part of the job. You can download the comprehensive guide to different mortgage types which will help you confidently explain the pros and cons of each option to your clients.

Understanding lender criteria

Lenders meticulously assess mortgage applications before offering approval. We've created The Ultimate Guide to Selling Mortgages which delves deeper into these criteria, empowering you to confidently advise your clients.

Transparency in mortgage lending

There's an ongoing discussion about lenders being more transparent with pricing and communication. As a broker, transparency is equally important and will help build trust and win repeat business. You can be a champion for your clients in this regard:

Clear communication: Proactively explain the application process and timescales, setting realistic expectations.
Fee breakdown: Ensure your clients understand all associated fees and charges upfront.
Managing expectations: Maintain open communication throughout the process, addressing any concerns promptly and being open if there are issues in the application process.

Learn more: How mortgage products are funded

Learn more: The state of play in the mortgage market

Serving clients with complex needs

Many brokers encounter clients with more complex financial arrangements, such as the self-employed or business owners. Understanding company accounts and credit reports is essential to effectively serve these clients.

Supporting the self-employed

Securing a mortgage can often present unique challenges for the self-employed, so knowing what to look for and what questions to ask the client is essential. The main difference is that the self-employed need to prove their income, with most lenders wanting to see at least two years worth of accounts and tax returns.

The more proof the better; having an accountant, a track record of regular work, a sizable deposit and a good credit history will all help in securing a loan. Learn more about supporting the self-employed in getting a mortgage here which will help equip you with the knowledge and tools to confidently guide these clients.

Buy-to-let and lender considerations

Buy-to-let mortgages are specifically designed for those purchasing property as an investment rather than a residence. Lenders typically look at the potential rental income to assess affordability, often requiring it to exceed mortgage payments by a certain percentage. They also consider the borrower’s broader financial situation, including their credit history and existing debts. Understanding the intricacies of buy-to-let lending will enable you to better serve clients looking to expand their property portfolios.

Credit issues

Clients with past credit issues may find obtaining a mortgage more challenging, but not impossible. Lenders will scrutinise their credit reports to evaluate risk. A strong and consistent profit and loss statement can demonstrate improved financial management and stability, helping to offset previous credit concerns. Advising clients on how to improve their credit profiles and understanding which lenders are more flexible with credit issues can significantly aid in securing a mortgage for these clients.

High net worth individuals

High net worth clients often have complex income streams and substantial assets. Lenders will look at a comprehensive picture of their financial situation, including diversified investments and substantial assets to offset potential risks from fluctuating income streams. These clients might also benefit from bespoke mortgage products tailored to their unique financial circumstances.

By understanding these complexities and how to navigate them, you can provide valuable assistance to clients with unique financial situations, ensuring they receive the best possible mortgage solutions.

Understanding company accounts

When lenders are considering lending to a business owner a company’s financial reports provide valuable insights into a company's financial health.

Here's a breakdown of key components, along with why they are important to a lender when assessing the terms and amount they are prepared to lend:

Balance sheet: This snapshot reveals a company's assets (what it owns), liabilities (what it owes), and shareholder equity (investment by owners) at a specific point in time. Specifically, the balance sheet gives lenders insight into the company’s assets, liabilities, and overall net worth. This can influence the lender’s perception of financial security. For example, a company with significant assets and low liabilities may be seen as more stable and less risky.
Comprehensive financial assessment: For buy-to-let lending, lenders focus on a clear property asset base, consistent rental income, positive cash flow, and low vacancy rates to ensure the borrower's ability to manage property-related expenses and meet loan obligations.
Profit and loss statement (P&L): Summarises a company's income and expenditure over a period, indicating profitability. The P&L is vital for lenders as it shows a company's ability to generate profit. A lender wants to see a history of profitability to ensure the company has the income to repay the loan with interest.
Cash flow statement: Tracks the movement of cash in and out of the business, revealing its financial liquidity. The cash flow statement shows the lender how well the company manages its cash flow. This is important because even a profitable company can struggle to repay a loan if they don't have enough readily available cash. The cash flow statement helps the lender assess the company's ability to meet its short-term obligations, including loan repayments.

Equipping yourself with the knowledge to decipher business accounts empowers you to confidently guide even the most complex clients towards homeownership. By understanding the intricacies of financial statements like P&Ls and cash flow statements, you can effectively navigate the lending process for the self-employed.

Business credit reports

For brokers specialising in commercial lending, understanding business credit reports is crucial. Similar to personal credit reports, these reports document a company's credit history and payment behaviour.

This information helps assess a company's ability to meet its financial obligations and repay a mortgage, providing valuable insights for making informed lending decisions.

Transparency is central to building trust with your clients. By understanding lender criteria, effectively communicating with your clients and possessing the ability to analyse company accounts and credit reports, you'll be well-positioned to guide your clients through their mortgage journey.

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