Don't trust just anyone to help you shop for a mortgage. Compare mortgage brokers to see what types of services they offer and what fees they charge. Use the following guide when shopping for mortgage brokers.
Why Use Mortgage Brokers?
Some home buyers wonder why they should consider using a mortgage broker rather than doing all the legwork of shopping for home loans on their own. A knowledgeable mortgage broker can not only save you time and money, but can help you better understand the lending process when refinancing or buying a home.
Mortgage brokers usually have access to several mortgage lenders. That means they should be able to offer you a wider variety of mortgage products that may appeal to you. Not all home buyers are the same, so they shouldn't be offered cookie-cutter home loans that aren't right for their situation.
Multiple Mortgage Quotes
When you only have one mortgage quote to consider, you aren't getting all the pieces of information you need to make an informed decision about a home refinance or purchase. The more mortgage quotes you have to consider, the more you can really begin to understand the different loan deals available. Any mortgage broker who only offers you one mortgage quote isn't really doing the job. Do not be pressured into accepting the first deal offered even if the mortgage rate seems low.
When comparing mortgage brokers look for experience. Resist hiring your cousin Bob just because he decided to get into the mortgage loan business--especially if he was selling used cars a couple months back. Look for a mortgage professional who has years of experience and really knows the business.
When you contact a mortgage broker, ask for the best mortgage rates and for an explanation of the different loan packages available. If the individual is unable to explain the difference between different mortgages or tries to brush off your questions, find a new broker.
Mortgage Brokers' Credentials
Mortgage brokers may work individually or for a company. They must be licensed in most states, but educational requirements can differ depending upon the location. People who are members of the National Association of Mortgage Brokers (NAMB) must subscribe to a code of ethics that requires them to:
- Provide accurate information in advertisements and solicitations
- Comply with laws and regulations when conducting business
- Disclose any equity or financial interest they have in collateral being offered to securitize a loan
- Be honest and have integrity when conducting business
How Mortgage Brokers Get Paid
Brokers earn fees on each home loan they close. Brokers save wholesale lenders the cost of keeping loan officer employees and retail branches, so the lenders payt the brokers for the loans they sell. The higher the interest rate on your loan, the more the broker makes--but he or she is still subject to competition. That's why it's important to get mortgage quotes from several brokers.
"The typical mortgage broker operates like a merchant that buys at one price and sells at a higher price. Brokers can earn on a transaction as much as they can induce borrowers to pay over the wholesale price," according to the Upfront Mortgage Brokers Association (UMB) Web site. "In addition, brokers have the ability to increase the amount of money they make on a transaction based on the type of loan that they can persuade the borrower to select."
Disclosing Fees First
The UMB requires its members to set a price upfront and give it to you in writing. The price can be a specific dollar amount, percentage of your home loan, or hourly charge. Keep in mind that this is just another pricing structure--it doesn;t guaranty the best deal, and you should still compare offerings of several brokers.
Be Careful Who You Do Business With
Choose your mortgage broker carefully. Avoid working with companies that have repeatedly changed their name and contact information. That could indicate that they had problems while doing business under a previous name. Also be wary of mortgage brokers who try to pressure you to accept the first mortgage refinance or purchase deal offered. Another red flag is when a broker dodges your phone calls or gives vague responses to questions. Finally, do not do business with anyone who encourages you to lie on a mortgage application.
- Compare several mortgage brokers when shopping for a home loan.
- Using a mortgage broker can save you time and money.
- Mortgage brokers have access to a variety of mortgage lenders and mortgage products.
- Find a professional with experience and integrity.
- Get information about fees and services before signing up.
- Avoid mortgage brokers with shady business practices.
Mortgage brokers and direct lenders work differently, but by comparing several, you can negotiate a fair deal from either.