For the first time in my life I am going to buy a place, and am currently shopping for mortgage broker. I have some names from friends/associates, but I have no way of telling a good MB from a bad MB. As a first time buyer, I have some questions specific to that which I plan to ask in the interview process, but I am wondering if there are any general questions that everyone should ask a prospective MB to guage if they are right for me. I searched around and found this site, do these seem reasonable? Anyone have any insight?
Ask around among your friends and coworkers. Many people including myself have more than a fewhorror stories that they do not often share. Since encounters with MS’s and RE agents can be few and far between, they know that a bad experience may not hurt them badly at least short run.
I know here we have a morgage provider that at least as I understand it operates purely by referral. They do not have big ad campaigns etc, but are putting dozens of employees to work on a daily basis.
Conduct and/or confirm any and all negotiations in writing. If you have a phone conversation, follow up with an email restating the terms you discussed and insist on a reply by email.
I loathe mortgage brokers, having been royally screwed over by both of the ones we’ve dealt with. I will never, ever, ever not get them to put their words to “paper” again.
Good luck.
Ask “How do you get paid?” The answer should be “I get paid by the lender. I get paid more if I can get you to accept a loan with a higher rate.” If that is not the answer, do not hire that person. (Search on “yield spread premium” to see how their compensation works).
A mortgage broker’s sole incentive to try to get you a lower rate is to keep you from going to someone else. You must make sure that any mortgage broker you hire understands that you will be hounding him or her daily about the rate until you lock it and that you will jump ship if you’re not satisfied. Otherwise they will not spend any time trying to find a lower rate for you. The way to get the lowest rate is not to hire a mortgage broker - you get the lowest rate by acting as a mortgage broker yourself and pitting lenders against each other.
You do not need a mortgage broker.
I have no idea how they became a part of the industry. Just another layer to skim some of the money that flies around so willy nilly.
Millions of people get loans without mortgage brokers. It’s almost like they made borrowing more confusing just so they could introduce another way for someone to get paid.
Brokers, friends or foes. . .
http://finance.yahoo.com/loans/article/103075/mortage-brokers-friends-or-foes
I concur that “broker” too often equals “guy who’d like to insert himself into the transaction in order to skim some bucks off the top”.
If you are an attractive borrower (i.e. one who can show he’s likely to reliably repay the mortgage) then you should by all means undertake to approach lenders directly, and make them compete for your business.
Lots of good advice, but just another viewpoint – my wife and I have excellent credit, and still use a mortgage broker. We’ve had a really bad one that we left, but the one we’ve used for 3 transactions now (my wife also used him to purchase a place before we met) is great.
Not only do we get great services from him without having to spend massive time looking ourselves, but on several occasions he’s talked us out of refinancing for good reasons. He’s admitted that if we refinance like we want to, he’ll make more money, but that on those two occasions it would not be in our best interest.
As an example, we wanted to take a mortgage we had with a 10-year locked interest rate, which will go up once the 10 years expires, and convert it to a 30 year fixed. Knowing we were financially disciplined and careful, he figured out what our payment would be by switching to a 30-year fixed, then figured that if we were committed to making that extra payment every month for the duration of our 10 year lower rate, that we’d come out way ahead of the curve. Basically keeping the low rate and applying the extra to principal each month.
He lost a commission, but gained long term customers by doing that. (He talked us out of a similar situation another time as well. Had a better approach for the extra money we were willing to spend that worked out much better for us.)
So there are good ones out there, but the bad ones? Well, my business partner is taking his bad broker (the one we stopped using) to court and suing him for $15,000.
Not sure I have specific questions to ask them to help you out, but just saying they can be helpful if you get the right one.
Hmm interesting. So those of you in the anti-broker camp would really recommend a first time buyer like me (with great credit) going without a broker? Seems like there are a lot of nuances to something like this, so I never even considered not using one.
I’m not sure (Mr Neville handled this), but I don’t think we used one to buy our first house earlier this year. We just shopped for loans ourselves. AFAIK, it’s not that hard if you’re used to comparison shopping online for other things.
We were looking for one with a major, well-established bank that we had heard of, with a good 30-year fixed rate. We figured we would be safe from most of the weird stuff with a fixed rate, and we figured that a major bank we had heard of was less likely to go under than some little mortgage company we’d never heard of. We also figured a major bank would probably be less likely to sell our loan to someone else, which makes unexpected changes less likely.
Having lived in the Bay Area, and having seen enough of people getting into trouble with exotic loans, we never considered anything other than a 30-year fixed rate. We could afford a reasonable house where we wanted to live with one, and figured we were better off with less house but more security. We are pack rats and hate moving, so we figure we’re likely to be in the house for a long time.
We don’t have any plans to refinance unless rates get a lot better than what we got (which we don’t think is likely anytime soon, since we got a good rate), or if we run into a real financial crisis and the alternative is losing our house. We don’t have any plans to take out a home equity loan unless we really have to- we know that using your home equity as an ATM is a relatively easy way to get into deep financial doo-doo. Neither of us is at all handy, so it’s not likely that we’d be taking a home equity loan to make major upgrades to the house.
If you’re in a situation like ours- you know what kind of loan you want (there are books like Home Buying for Dummies and Mortgages for Dummies to help you figure this out if you don’t know yet, and we figure a $20 book is probably cheaper than most mortgage brokers) and you know that it’s likely to be a one-shot deal- you might do well not going through a broker.