How to chose a Mortgage Broker

I don't know who is more hated...a Used Car Salesman or a Mortgage Broker. Both suffer from the reputation of not being honest and forthright in negotiating. So, how to chose one who is.

1) Education: All Loan Originators in Oregon are required to go through the same basic training and continuing education. Beyond that...its a free-for-all. Ask your Loan Originator prospects what formal education they have (AA, BA, MBA). Ask them if they have ever applied their education in traditional business. Look for a Lender with a strong background in business, finance, contracts and taxation.

2) Experience: Try to find a Lender who not only has broad experience and many years of transactional history, but specific experience to YOUR needs. If you need a VA loan make sure your lender knows them inside and out, and preferably, is a Veteran! Verify that your Lender knows what he/she is doing.

3) Reputation: Your Mortgage Broker shops your loan to multiple Banks. The better Brokers with good reputations and a strong history get better deals from the banks, and can therefore get you better rate/terms. Be sure the Lender you chose is very reputable and is on good terms with the banks they originate for.

4) Full Disclosure: There are three basic areas where Brokers take money from your pocket:
1) Pass-through costs. These include credit reports, appraisals, courier, underwriting, Escrow, title and impounds (Taxes and insurance). These are not allowed to be marked up and should be the same from Broker to Broker.
2) Broker fees. Origination, Broker fee, Processing fee. These all vary wildly from Broker to Broker. A 1% origination and up to $495 for processing are considered fair.
3) Rebate or YSP. This is the biggy...this is what the bank pays back to the Broker for your loan after closing. The higher the rate the Broker gets you to commit to, the higher the rebate payment they will receive. On the norm most reputable Brokers will try to make about 1% in rebate. A good Broker will tell you what their target rebate is so you can balance all fees and costs while evaluating your loan options.

Reasons not to hire a Mortgage Broker:

1) They are a friend, family member or some other associate. That in and of itself is not a reason to hire someone.
2) They tell you what you want to hear and push a loan product that they want to sell. You are paying for quality advice based on your unique financial needs.
3) It is always the right time to refinance....WRONG. A good Broker turns away a lot of applicants because the timing is not right (Rates, credit, LTV and other considerations).
4) They are super busy, so they must be good. If they are that busy, when will they help you? There is an art to locking in the best rate and watching the markets. Make sure they are not swamped and unable to attend to your file.


Reasons to hire a Mortgage Broker:

1) Personal reference from someone who you trust.
2) They thoroughly evaluate your situation before offering a product.
3) They are not stretched too thin with other clients.
4) They fully disclose all costs and show you how much they will make on your loan...including Rebate/YSP..

Hiring the right Lender can make a huge difference in the outcome of your transaction. They can save you thousands of dollars and make the process much easier. Buying /selling or refinancing a home will probably be the largest single financial endeavor you undertake in your life. Make sure the Lender you hire is the best suited to your needs.

Some common Lender tricks:

1) "No closing costs": This is a lie. All loans have costs. Any Lender can pay those costs for you, but MUST charge a higher interest rate to get a larger rebate from the bank to cover them. Most loans with 'no closing costs' have an interest rate 1% higher than a traditional loan.

2) "We have the best rates". This is a lie. All Brokers have access to the same rate sheets and can offer the same rates in any apple-to-apple scenario.

3) "Now is the best time". Maybe...maybe not. Each financing scenario is unique. Where it may be perfect for Client A to refinance right now, client B may actually benefit from waiting.