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Mortgage Brokers

May 27, 2008  |  Difficulty: Easy

Path to mortage

Call it the ‘Middle Man’

Your real estate agent will bring you (the buyer) together with a homeowner (the seller). This is exactly what your mortgage broker will do. The mortgage broker will bring you (the borrower) together with a home mortgage agency or bank (the lender).

There are shifty real estate agents who are only looking out for themselves and future profits. The same goes for mortgage brokers; there are some out there who are only out for money. You have to do research to make sure that you avoid those types of brokers. Bad brokers look for ways to increase their pay, meaning that they may connect you with lenders who give higher interest rates. And this can mean years of hard time for you.

Is there really a need for a mortgage broker? A lot of people think so. Some mortgage brokers are connected to lenders who have good loan practices and terms. The broker will use his or her connections to submit your application to lenders that can potentially give you the best rates. When under contract, your broker is required to find you the best rate possible. Remember, if there isn’t a contract, the broker isn’t under any restriction to find the best rate. If you don’t want to enter a contract, you can work with several mortgage brokers to obtain several mortgage quotes, as this will help you to find lenders that are willing to work with you.

Knowing the inside scoop with mortgage brokers can be a big help. Mortgage brokers are paid depending on the amount of the loan. Bad brokers will try to motivate you to sign for a loan that is more than what you actually need. Knowing this can help you to spot out a broker that is on the look out for a sizable commission. DO NOT let a broker talk you into signing for a loan that you cannot finance.

It was reported in 2004 that a mortgage broker was paid at least 1.7 percent of the total loan amount. If you don’t want to pay that much for a broker you can enter into a “yield spread premium”. This means that you can increase the interest rate of your loan so you will not have to pay for a portion or all of the broker’s fees.

Be aware of this broker scam. The broker can get the lender to increase the interest rate of the loan without your consent. This means that the broker will get more commission, as well as the broker fees from the lender. If you aren’t observant all of this can be done right under your nose!

Be sure to look on your closing statements for any extra costs or fees paid by the lender. The fees paid to the broker are called “paid outside closing”, also known as “POC fees”. The POC fees are located in a separate place away from the other closing cost that is on your closing statement. If you see that there is a POC fee, ask your broker if he or she is receiving these fees after increasing your interest rate. If your broker fesses up, make sure things are rectified immediately.

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