Mortgage brokers are Evil?

In 1990 everyone was crying about how evil lawyers and contractors are. Lawyer jokes were common tales told around cocktail tables and functions. At the turn of the decade, mortgage brokers were added to the list and they too are under a lot of scrutiny and the pun of many jokes.

Mortgage brokers are evil? The answer is simple: no. There are shady mortgage brokers who will try you with your hard earned money? Off course! Every profession has bad apples! These are bad apples in the majority? No, let's discuss why.

1) Mortgage brokers want your business - Most mortgage brokers work on commission and rely heavily on word of mouth advertising to generate customers. Furthermore, 50% a good mortgage broker business is regular customers, mortgage brokers have an incentive to service their customers properly and keep them at long range.

2) The competition keeps them honest - Given the influx of many new mortgage brokers in the last two years, the mortgage business is a very competitive sector. There are a large number of brokers competing for a small customer base. Brokers almost always give you the best rate in order not to lose your business. Remember, brokers do not get paid until the loan fund. This is also a good reason to talk to at least four different brokers from different companies, let them compete for your loan and you will almost always shine at the end.

3) The law is there to protect you - God bless America! There are many laws in this country that govern mortgage brokers and let me tell you that the laws of loan are not very tolerant in this country. Mortgage brokers take a lot of heat when they do shady deals and all that is needed is a simple complaint. Make sure you have everything in writing from your broker and you will be protected, simply as such.

The evil of mortgage brokers

mortgage brokers do not fund your loan themselves, using the wholesale lender and banks to find the right loan and save money. The problem arises in the way they are compensated. Wholesale lenders do not set interest rates, or the broker. The interest in going is dictated by the secondary market for mortgage securities. As the prices are dictated is a discussion in itself, is unimportant in our discussion.

Assume that the simple go "rate parity" for 30 years fixed mortgage is 6%. If funding mortgage broker your loan to 6% of mortgage broker fees is zero. The higher the interest rate to close the loan, the Commission rather than receive. Also, if you charge a lower interest rate to 6%, have to pay money from their own pockets to fund the loan, or charge the client what is called a "discount point" to get the rate they want. Fortunately the law has a limit on how much of a commission a broker can do on a particular loan. However, your goal should be to lower the interest rate as possible.

What is the lesson to be learned here, when mortgage brokers cite one case, have room to lower it, unless they gave you par pricing, which is not likely. Given our example above a broker could sue for 6.5%, where the broker makes $ 2,000.00. If you're a good negotiator you can get the broker to lower the interest rate, where the broker makes only $ 1,000.00 the agreement, you save lots of money!

Be Careful tax

By law, a mortgage broker is entitled to charge a fee to find you the right loan. When negotiating, do not overlook these costs. Discover what they are and make sure you talk to them about it. Rates are negotiable, do not let anyone tell you otherwise. The thing to ask because when looking at taxes, what am I paying this fee is for the evaluation, the notary service, processing, etc.? Costs there because something must be done to fund the loan and is nessesary or is the broker just trying to make money off of me? Remember, the broker makes his money on the interest rate spread between what you pay and what the "rate parity" is. Out rates that are considered "junk fees" and should be avoided if possible. If the broker, you pay a super low price, give it a bit ', they need to make money somewhere.

Pounding your mortgage broker for the best price

To successfully get the best price for your loan with a broker, keep in mind that the broker needs to make a living. If you grind too much, he probably does not take you seriously, just do not want to make the loan. Be reasonable, let the broker make money off of your loan that will work hard to get the lowest rate. The broker can return to the wholesale lender and grind them for a lower rate, but if there is no money in it for the broker, there is no incentive.

What I suggest is to talk with a couple of different brokers and let them compete. This was a very difficult task until recently, fortunately there are many good guides online lender website that will analyze your needs and match you with four of the best banks according to your situation. What would take days to make browsing the online yellow pages now takes 60 seconds.