In each province, there
are thousands of mortgage brokers. How do you know which one to choose so that
you will end up at the closing table on time with the interest rate, loan terms
and fees promised to you? Here are some tips and data that hopefully will give
you the information and tools needed to find the right mortgage broker, how to
work with them, and to help minimize the risks before you get to the closing
table.
First, let's eliminate
some of the ways borrowers typically choose a mortgage broker. This may just
remove most of the problems before they occur.
How Not to Shop for a
Mortgage
As a lot of people do,
you could go to the Internet and call the first few mortgage brokers that pop
up, check the local Sunday Real Estate Section to see who has the best rate, or
call someone from out of the Yellow Pages. However, these should be defined as
ways NOT to shop for a mortgage:
Searching On-Line
Almost every mortgage
broker is listed on the Internet. While it is a great resource, it is not the
best way to shop for a mortgage. It may be obvious to some, but just because a
mortgage broker's Web site shows up high on search engine listings does not
mean they have the lowest rates or have the best service, or are even reputable.
High search engine rankings do not speak to these factors, but rather to the
fact that the webmaster who built the Web site probably spent hundreds of hours
building and fine-tuning their site to show up on the Internet listings when
you type in certain mortgage "keywords". Search engines do not rank
listings by the quality or reputation of a broker but more by the amount of
other similar Web sites that link to that Web site, the number of visitors it
receives, how much the broker may have paid to be listed there, and many other
factors.
There are many Web
sites that list mortgage company's rates online. I don't put too much stock in
sites that list these company's rates online. Typically mortgage brokers pay to
be listed on those sites and some are "affiliate" sites. This means
they are charged a fee when the visitor goes to the link that was clicked on.
To find out if you are on an "affiliate" site, click on the link it
takes you to and examine the web address. If it has a code at the end of the
domain name, such as "http://www.anybroker.com/source=2519" it is
generally an affiliate. There is nothing wrong or illegal about this, just
realize some of the sites may be biased by the companies that pay or give an
incentive to be listed on their site.
Another tip is not to
waste time clicking on sponsored links. On Google, they are listed in the
right column, (and recently at the top of every page in a shaded box) while
AOL's links are lightly colored boxes at the top and bottom of the page and on
Yahoo, they are listed in the column on the right side and at the bottom of the
page in a colored box. As the name implies they are "sponsored"
links which means to be listed the broker has paid to be there.
Be aware that if you
complete a form on a mortgage Web site concerning wanting more information
prepared to be flooded with calls or emails from mortgage brokers wanting your
business. There are a lot of Web sites that are only "lead" sites.
They get your information and then sell that information to mortgage brokers
across the nation. Only submit information on the Web site of the mortgage
broker that you know you will be working with.
The bottom line is the
Internet is a great way to find out more about a mortgage broker that you are
considering using but it may not be the best way to find one you can trust.
Choosing a Mortgage
Broker Based Solely On Rate
The interest rate obtained on a mortgage is one of the most important factors
of a loan, but it is not everything. There can be separate closing fees that can
factor into the total cost of obtaining a mortgage loan.
Don't be fooled by
brokers advertising that they have the lowest rates. Most mortgage brokers and
lenders have about the same rate on comparable programs on any particular day..
When selecting a mortgage broker the interest rate is an important factor but
let's take it a step further to get a better picture of the total cost to you.
Where to Start
When you are looking
for any type of professional service person, accountant, dentist, etc, who do
you turn to? People typically ask the opinion of someone they trust, be it
family, friends, neighbors, co-workers, attorneys, accountants,s or other
professionals. The referral method can also be used to help find a mortgage
broker.
Make a list of 10
people (who have a mortgage) and ask the name of the broker they worked with.
Be sure and get the name of the person they worked with. Keep in mind that
service between one broker and another can vary widely so you will want to
contact that specific person, not just anyone in that broker. Also, be sure to
ask if they were happy with the rate and service they received.
Collect at least three
names of loan officers or brokers or maybe even up to seven or eight. Why so
many? Because it may have been a few months or years since your referral source
last used this individual and it is possible that they have moved to a different
company or even changed careers. In addition, not every mortgage broker is
going to want to work with you concerning items that we are discussing. Also, list
any brokers that you have used in the past and were happy with.
A wise businessman
once told me. "Know who you are dealing with". Now that you have a
preliminary list of names let's try to find out a little more about whom you
are dealing with. To help with this I have put together two simple approaches:
1. Background checks
2. Making contact
(Parts A and B).
Step 1 - Simple
Background Checks
Don't worry, there is
no need to hire a private investigator or do any "dumpster diving" to
gain secret information. I do, however, suggest that you do a little
investigative work. It should only take about 30 minutes and it will not cost
you anything. In fact, it may save you a bundle of money and stress later in
the process.
Visit the government
Web site for the state in which the mortgage broker is located that you are
researching. Locate the page that has a list of mortgage brokers or lenders. If
the company you are researching is not listed they may be listed under a
different name. Also, you may be able to search by the individual’s name.
If they are listed,
it may also list how long the broker has been licensed (you should do business
with them only if they have been in business for a minimum of two years), how
many loans they have closed in the previous year, how many employees they have,
and if they have had any consumer complaints made against them, administrative
fines levied or regulatory orders (such as "cease and desist" orders)
placed on them, any of their employees or broker. Be sure to search under the individual’s
name Checking with the Better Business
Bureau may give you some additional information but in my experience, most
mortgage brokers and lenders are not members of the BBB.
Find their Web site
and read about them. Do they post their rates and update them daily? Do they
offer informative articles or information? Read their bio's, Mission Statement, and Privacy Policy to try to get a sense of what they are about, what they
stand for, and their vision of how they conduct their business. In addition,
look for membership in professional associations, awards, etc. If they do not
have a Web site I would not deal with them.
There are also local
mortgage associations. I would give credit to the broker for being a part of a
group that offers ongoing education and sets goals of ethical standards to
their members.
Look on the company
Web site to see if they are a member of any of these mortgage organizations or
other trade associations. However, keep in mind that just because you see one
or all of these logos or references on their Web site, does not mean that the
person you are working with holds the designation or is a member of that
association.
Here is a recap of
information to research as you are narrowing down your top candidates:
o How long in
business?
o BBB complaints?
o Has a Web site?
o Rates are posted
daily?
o Member of any
national or local mortgage association?
o Professional
designations?
STEP 2 - MAKING
CONTACT
The next step is to
contact the mortgage broker to whom you were referred.
Part A - Approaching
the Broker
If you were referred
to a specific broker try to stay with that person. If you just have a broker
name or if the individual you were referred to is no longer there and you still
wish to check out the brokerage, ask for the broker or manager of the company.
While this may not always be possible or practical, unlike a mortgage agent,
the broker does not have to split the income with anyone else. In a larger
brokerage, the broker may not be able to give your loan the full attention it
needs. But always start with the broker or manager and work down.
Here is a suggested way
to start the conversation:
"My name is
_________ I am shopping for a mortgage and am calling a few brokers that have
been recommended to me to see who I would like to establish a business
relationship with. I was recommended to you by __________.
Do you have a few
minutes to speak?
Great, I have just a
few questions:
If they agree to speak
to you, briefly lay out what you are doing, including if you are looking for
financing for a purchase or refinance and the loan amount. In addition, mention
your credit scores or credit history, the percentage of down payment. Then ask,
if they offer the type of financing you need. If the person starts to offer
rates, terms etc. politely let him know that you are not shopping for the rate
and product now, rather you just want to get some basic information.
Another good question
to ask is how long they have been in business. (If speaking with a mortgage
agent- how long they have been with this brokerage as well as how long they
have been in the mortgage business.) I suggest you work with someone that has
been in the mortgage business for at least two years.
The most important
information is if they are a broker or lender, how long they have been in the
business, and maybe if they offer the type of financing you are looking for.
Part B - The Interview
Once you have narrowed
down your list of potential mortgage brokers that you may want to deal with, it
is time for the interview.
Start by calling them
back and let them know you may be interested in working with them and you would
like to get more information. I always suggest that you meet face-to-face at
their office if possible so that you can get a feel for them and their brokerage.
If you can't meet with them at their office you can do it over the phone or via
zoom. Be prepared with your list of
questions listed below, as they may want to do the interview immediately.
When you speak with
them, again mention what type of loan you will need, (purchase or refinance,
conventional, construction, investment, etc.) and be prepared to go into some
detail about your financial situation, including employment status, credit
history, down payment amount and the source of it and a rough idea of your
financial assets. Do not let them start taking an application on you. You are
there to interview them, not the other way around.
Do not give out your
Social
Insurance number during this interview. There is no need to do this yet
as you are not going to decide on what broker to deal with until you have
interviewed everyone on your list.
Questions to Ask the
Mortgage Broker
Here is a list of suggested questions to ask the broker or loan officer.
Application Questions
o Will I get a
pre-approval?
o Will you guarantee
your estimate of closing costs? If not all at least yours?
o If my credit score
affects the interest rate and/or product is it possible that you will help me
raise my score to obtain a better rate and product?
o What is your
approximate closing ratio for loan applications taken?
Keisha Johnson helps individuals position themselves to take advantage of great opportunities such as homeownership as well as achieve their investment potential in the real estate market. She is a community service award winner and offers her service to the community by educating the youth about their credit and positioning themselves to take advantage of great opportunities in the future.
With over 10 years of experience, she has extensive knowledge that she shares with her clients during the home purchase process. Whether they are first-time homebuyers looking to take equity out of their home, or they're ready to purchase an investment property, Keisha educates her clients so they feel empowered with information during the home purchase journey
You may contact Mortgage Broker Keisha Johnson at kj@rtsmortgagefinancial.com
