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Selecting A Mortgage Broker - Items To Consider
A lot of people don't trust mortgage brokers. Considering the number of people who have been taken advantage of by mortgage brokers over the years, it's no wonder why a lot of people feel this way.
On the other hand, of course you should always give your mortgage broker the benefit of the doubt. After all, there are still some good brokers out there who can get you a great deal on your mortgage, so don't give up just yet.
To avoid being taken advantage of, you need to familiarize yourself with a couple of things. For one, you need to know how mortgage brokers get paid.
The most important thing to understand is the fees that are associated with the mortgage process. A mortgage broker gets paid for their work by closing your loan; therefore, the broker doesn't get paid until you have completed the mortgage process and closed on the loan. They receive either an origination fee or a lender fee and your closing documents will note the fees and what they are.
The origination fee is a payment made to the broker for actually arranging the loan. The fee goes straight to the mortgage company or it may be shared with the broker himself. There is no fixed fee as it is dependent on the amount of the loan but if it goes over one percent of the loan, then know that you are probably paying too much.
The second way is where the mortgage broker really makes money. A fee is paid by the lender to the mortgage broker for giving you a higher interest rate on a loan so that you make higher monthly payments.
The latter fee is also known as the Yield Spread Premium. You should definitely find a broker who will avoid it.
When it comes to finding a good broker, look for those who are not employed by any mortgage company. Self-employed brokers incur less overhead cost so the origination fee might be enough for them not to go after the yield spread premium.
On the other hand, of course you should always give your mortgage broker the benefit of the doubt. After all, there are still some good brokers out there who can get you a great deal on your mortgage, so don't give up just yet.
To avoid being taken advantage of, you need to familiarize yourself with a couple of things. For one, you need to know how mortgage brokers get paid.
The most important thing to understand is the fees that are associated with the mortgage process. A mortgage broker gets paid for their work by closing your loan; therefore, the broker doesn't get paid until you have completed the mortgage process and closed on the loan. They receive either an origination fee or a lender fee and your closing documents will note the fees and what they are.
The origination fee is a payment made to the broker for actually arranging the loan. The fee goes straight to the mortgage company or it may be shared with the broker himself. There is no fixed fee as it is dependent on the amount of the loan but if it goes over one percent of the loan, then know that you are probably paying too much.
The second way is where the mortgage broker really makes money. A fee is paid by the lender to the mortgage broker for giving you a higher interest rate on a loan so that you make higher monthly payments.
The latter fee is also known as the Yield Spread Premium. You should definitely find a broker who will avoid it.
When it comes to finding a good broker, look for those who are not employed by any mortgage company. Self-employed brokers incur less overhead cost so the origination fee might be enough for them not to go after the yield spread premium.
About the Author:
This author has been contributing articles about mortgage rates for the past two years. In addition, this individual takes pleasure in blogging on New York City neighborhood subjects, like Prospect Park real estate as well as Windsor Terrace real estate.