What to ask a Mortgage Broker

Four things to ask a mortgage broker

Over half of mortgage borrower obtains their credit through broker. One of the major advantages of using a mortgage broker instead of going through a local financial institution is that the broker can buy between different creditors to find the best business. A lot of mortgage agents are small companies. Borrower often have the feeling, whether legitimate or not, that they can rely on reputable creditors such as Wells Fargo, Washington Mutual and Citigroup, but they often do not seem so secure against small brokerage houses with low promotional-budget.

Here are four things to ask a mortgage broker, if that will describe you, with whom you are considering dealing: Have you been in it long? What do you do with price tags? In the ideal case you have found the broker by a referral of a boyfriend, relatives or employee. However, if you have chosen a broker according to a different criteria - perhaps you pass the broker agency every single working day, or you have reacted to a live email ad - you can ask for our credentials.

Request the last two or three clients who have contracted their credit for the name and details of their contacts. Check whether they were fairly handled and whether the broker's good-bye estimate of closure charges was correct. First of all, ask them if they would do deals with the broker again. They might find themselves speaking to a borrowers who is already a regular buyer - someone who got the original mortgage through the broker, then refinanced through the same broker.

Have you been in it long? If you are looking for someone who hasn't jumped to the top to browse in the present refinance boom - in other words, for someone who has had a mortgage careers in sluggish periods as well as in today's hectic periods - pick a broker who has been providing home loan finance for at least three years.

Since the beginning of the funding booming at the beginning of 2001, there have been tens of millions of mortgage intermediaries entering the market. Their broker is more likely to stay around if he or she brokered home loans back in the relatively lethargic days of 1999 and 2000. There are two major options for mortgage brokers: charges and spreads.

Brokerage fees are often charged in the shape of points, with one point representing 1 per cent of the amount of credit. You may find it quoted on the mortgage documentation as the origin fees of the originator or the mortgage broker's brokerage fees. Returns differential premiums are a contentious way of compensating brokerage firms.

These payments are a mark-up on the return. In theory, spreads are not necessarily detrimental to the borrower.

When you do not have the funds to cover the acquisition fees, the broker can grant you a mortgage at a slightly higher interest fee and charge the return premiums on the acquisition fees. Bankers do the same kind of thing - insure free lending for slightly higher interest Rates than borrower would otherwise be eligible to get paid.

In 2002, a Harvard Law Prof. Howell E. Jackson survey found that return mark-ups "for borrower are not a good business, but primarily designed to raise the remuneration of mortgage agents. "Jackson did his research as he prepared to act as an appraiser on account of debtors who sued a small firm that gave spreads to brokerage firms.

What do you do with price tags? Well, some stockbrokers play with rate-locks. Tell the broker to block a certain price on a certain date, and the broker will tell you on the telephone that your price is blocked. The broker does not clandestinely block the price and hopes that the prices will fall before your trade date.

When interest returns fall - even if they only fall for one trading day at a time - the broker can conclude a deal at this lower price. You' re paying the higher price you chose. A broker can make a small gain out of the distinction. When interest doesn't fall and instead rises, the broker could tell you that there was a breakdown in your stationery, or that the credit processing was otherwise retarded, and that it's not possible to shut down your loans before your interest freeze runs out.

The broker could tell you that you are wrong and that you have never really blocked your price. If you are not sure, the surest way to go is to ask your broker for a credit approval from your creditor. They should have the name of the creditor and indicate the interest rates, the date on which the interest rates were blocked and the date on which the block will expire.