| In the 1990's everyone was crying about how evil | | | | funds your loan at 6% the mortgage broker makes |
| lawyers and contractors are. Lawyer jokes were | | | | zero in commissions. The higher the interest rate |
| common tales told around cocktail tables and | | | | they close your loan with, the more commission they |
| functions. At the turn of the decade, mortgage | | | | receive. Moreover, if they charge you an interest |
| brokers were added to the list and they too are | | | | rate below 6%, they have to pay money out of |
| under a lot of scrutiny and the pun of many jokes. | | | | their own pocket to fund the loan, or charge the |
| Are mortgage brokers evil? The answer is simple no. | | | | client what is called a "discount point" to get the rate |
| Are there shady mortgage brokers that will try to | | | | they want. Luckily the law has a cap on how much |
| con you out of your hard earned money? Off | | | | of a commission a broker can make on a particular |
| course! Every profession has bad apples! Are these | | | | loan. Nonetheless, your goal should be to lower the |
| bad apples the majority? No, let's discuss why. | | | | interest rate as much as possible. |
| 1) Mortgage brokers want your business - Most | | | | What is the lesson to be learned here, when |
| mortgage brokers work on commission and rely | | | | mortgage brokers quote you a rate, they have room |
| heavily on word of mouth advertising to generate | | | | to lower it; unless they gave you par pricing, which is |
| clients. Furthermore, 50% of a good mortgage | | | | not likely. Given our example above a broker might |
| brokers business is repeat customers; mortgage | | | | quote you 6.5%, where the broker makes $2,000.00. |
| brokers have an incentive to service their customers | | | | If you are a good negotiator you can get the broker |
| properly and keep them in the long haul. | | | | to lower the interest rate, where the broker only |
| 2) The competition keeps them honest - Given the | | | | makes a $1,000.00 on the deal, you will save big |
| influx of many new mortgage brokers in the last | | | | bucks! |
| couple of years, the mortgage business is a very | | | | Be Careful Of the Fees |
| competitive field. There are a large number of | | | | By law, a mortgage broker is permitted to charge |
| brokers competing for a small base of customers. | | | | you a fee for finding you the right loan. When |
| Brokers will almost always give you their best rate in | | | | negotiating, don't neglect these fees. Find out what |
| order not to loose your business. Remember, brokers | | | | they are and make sure you talk to them about it. |
| don't get paid until they fund the loan. This is also a | | | | Fees are negotiable; don't let anyone tell you |
| good reason to speak to at least four different | | | | otherwise. The thing to ask yourself for when looking |
| brokers from different companies, let them compete | | | | at fees is, what am I paying this fee for, is it for an |
| for your loan and you will almost always shine at the | | | | appraisal, notary service, processing etc? Is the fee |
| end. | | | | there because something must be done to fund the |
| 3) The law is there to protect you - God bless | | | | loan and is nessesary or is the broker just trying to |
| America! We have many laws in this country that | | | | make some money off of me? Remember, the |
| govern mortgage brokers and let me tell you that | | | | broker makes his money on the interest rate spread |
| the lending laws are not very forgiving in this country. | | | | between what he charged you and what the "par |
| Mortgage brokers will take a lot of heat when they | | | | rate" is. Fees outside of that are considered "Junk |
| do shady deals and all it takes is one simple complaint. | | | | Fees" and should be avoided if possible. If the broker, |
| Make sure you get everything in writing from your | | | | charged you a super low rate, give him a little, they |
| broker and you will be protected, simply as that. | | | | need to make money somewhere. |
| The Bad about Mortgage Brokers | | | | Pounding Your Mortgage Broker For The Best Rate |
| Mortgage brokers do not fund your loan themselves; | | | | To successfully get the best rate on your loan with a |
| they use wholesale lender and banks to find you the | | | | broker, keep in mind that the broker needs to make |
| right loan and save you money. The problem arises in | | | | a living. If you grind them too much, chances are |
| how they are compensated. Wholesale lenders do | | | | they will not take you seriously and simply not want |
| not set interest rates, nor do the brokers. The going | | | | to do the loan. Be reasonable, let the broker make |
| interest is dictated by the secondary mortgage | | | | money off of your loan and they will work hard to |
| securities market. How rates are dictated is a | | | | get you the lowest rate. The broker can go back to |
| discussion by itself, which is unimportant in our | | | | the wholesale lender and grind them for a lower rate, |
| discussion. | | | | but if there is no money in it for the broker, there is |
| Lets simple assume the going "par rate" for a 30 | | | | no incentive. |
| year fixed mortgage is 6%. If the mortgage broker | | | | |