Applying For a Mortgage
Mortgage Brokers
Mortgage brokers can do the mortgage shopping for you. Mortgage brokers are middlemen, independent of banks or other financial institutions that actually have money to lend.
If your credit history and ability to qualify for a mortgage are questionable, a good mortgage broker can help to polish and package your application and steer you to the few lenders that may make you a loan. Brokers can also help if lenders don't want to make loans on unusual properties that you're interested in buying. Many lenders don't like dealing with co-ops and tenancies-in-common, borrowers with credit problems, or situations where a homebuyer seeks to borrow most (90 percent or more) of the value of a property. Brokers can usually help with these and other unusual circumstances.
Interviewing a Mortgage Broker
In addition to understanding and negotiating a commission with the mortgage broker, also get answers to the following questions when choosing a mortgage broker:
- How many lenders does the broker do business with, and how does the broker keep up-to-date with new lenders and loans that may be better? Some mortgage brokers, out of habit, send their business to just a few lenders and don't get you the best deals. Ask brokers which lenders have approved the broker to represent them.
- How knowledgeable is the broker about the loan programs, and does the broker have the patience to explain all of a loan's important features? The more lenders a mortgage broker represents, the less likely the broker is to know the nuances of each and every loan. Be especially wary of a salesperson who aggressively pushes certain loan programs and glosses over or ignores explaining the important points we've discussed for evaluating particular mortgages.
- All the advice that we give for selecting a good lender applies doubly for choosing a good mortgage broker. Some brokers, for example, have been known to push programs with outrageous interest rates and points, which, not too surprisingly, entail big commissions for them.
- Also head for cover if your mortgage broker pushes you toward balloon and negative amortization loans.
- Even if you plan to shop on your own, talking to a mortgage broker may be worthwhile. At the very least, you can compare what you find with what brokers say they can get for you.
- Be aware, though, that some brokers only tell you what you want to hear -- that they can beat your best find. Later, you may discover that the broker isn't able to deliver when the time comes.
- If the broker was playing games to get your business, charging the broker's up-front fee on your credit card allows you to dispute the charge and get your money back.
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