Facts Behind Using a Mortgage Broker
Since the real estate crash of 2008, mortgage brokers are under close scrutiny by the Consumer Finance Protection Bureau for the information they give potential borrowers. Although the majority of brokers try to quote the best rate for consumers, some in the industry feel brokers do not have the consumer’s best interests at heart. New predatory lending laws protect consumers from rogue brokers in many ways, but some brokers who wish to prey on uneducated borrowers manage to slip through the cracks. That is why consumers should learn some basics about mortgage brokers and their job roles and responsibilities.
What Mortgage Brokers Bring to the Table
Reputable brokers usually maintain an extensive list of lenders giving borrowers an opportunity to compare terms from multiple companies. Brokers also help consumers sift through the mounds of paperwork involved in mortgage contracts. Some lenders bury burdensome payment terms deep within their contracts, and brokers help borrowers stay away from those companies. A competent and respected mortgage broker helps borrowers save money in closing costs and fees. Brokers can help get some of the fees waived such as appraisal fees, origination fees and underwriting fees.
How to Choose a Mortgage Broker
First of all, consumers must be aware that mortgage brokers are salespeople first. The bottom line is they want potential borrowers to apply for mortgages through their companies. Therefore, consumers must ask some critical questions before applying with any broker.
Potential borrowers must ask mortgage brokers for references. Consumers should talk to the references and ask if the broker treated them fairly. Borrowers should also ask the references if the final closing costs matched the initial good faith estimate. Finally, consumers need to ask if the references would do business with that broker again.
Many reputable brokers report that the question borrowers ask most often is how long have they been in business. With a refinancing boom in the housing market, many new brokers entered the playing field. Although a new mortgage broker does not signal a bad broker, many of them will leave the industry once the housing market stabilizes. A good tip is to choose a broker with at least three years of experience.
Disadvantages of Mortgage Brokers
One of the biggest disadvantages of using a mortgage broker is that many lenders refuse to work with brokers. Lenders do not want to pay fees associated with mortgage brokers and prefer to work directly with customers. However, this can cause big headaches for customers in the market for new mortgages because they now must search for the right lenders themselves. Other disadvantages include brokers do not guarantee estimates, and there is no guarantee that mortgage brokers will deliver the best deals.
Knowledge is the most important aspect when searching for a mortgage broker. Unfortunately, many consumers do not educate themselves with the proper information before they apply for a mortgage. Using the power of the information era and technology, consumers can easily gain an advantage and find what they need to ensure they receive the best terms on their mortgage loans.