Most borrowers go through a mortgage broker for their home loan services. A broker can shop among different lenders to find the best deal; this is one of the main advantages to using a broker instead of a bank.
Justified or not borrowers a lot of times feel they then can trust the big name lenders and banks. They don’t always feel as confident about small mortgage broker companies.
Here are four questions to ask a mortgage broker if you are thinking of using their services.
Can I get references?
You may have already found the broker through a reference such as a friend, relative, or coworker. But if you selected a broker through another measure, you can definitely request references.
Get the names and contact information of their most recent two or three customers. Ask them how they were treated and if they would do business with the broker again.
How long have you been in business?
What is long enough? A new mortgage broker can even give good service. But if you are looking for someone who has had a career in the mortgage industry in slow times as well as good, choose a broker who has been doing home loans for at least three years.
How are you compensated?
Fees and yield spread premiums are the two main ways that mortgage brokers gets paid. The fee will often come in the form of points, where one point will equal one percent of the loan amount.
You may find it listed as the lender’s origination fee or mortgage broker commission on the loan documents. There might also be application, funding, processing, and document preparation fees.
How do you handle rate locks?
Brokers will sometimes gamble with rate locks. You may tell your broker to lock a particular rate on a certain date, and they will tell you on the phone that they did. The broker could secretly not lock the rate in hopes that rates will go down before your closing day.
If they do this and the rates do go down even just for a day, the broker can lock at the lower rate. But you will still pay the higher rate that you previously locked at. The broker makes a little profit on the difference.
The best way to handle this is to ask your broker for a loan commitment letter from the lender.