broker is an interesting animal. Searching online you will find that many mortgage brokers will exclaim
that there is no fee, or, we do all the heavy lifting and you don't pay a
cent! (Disclaimer: I've paraphrased slightly). You should be aware that there is no such thing as free, and you will
get out what you put in. Research is key
here. If you have good credit and you are a
complex and busy person with no time or stomach for paperwork, then a mortgage
broker might be worth it. They will meet
with you and provide you with options and, to this point, charge no fee.
thing about a mortgage broker is that they can run the gamut of loan options
out there. If you go to your bank, you're
going to get your bank's options, or credit union's options, and on and on. Mortgage brokers act like the Expedia of mortgage
loans, looking over a wide range of options and providing you with the best fit
for your money. In theory. This goes back to researching your options regarding brokers. Picking a broker that has a
poor record or is complacent in his or her duties may not be in your best
So how do
they get paid? Finder's fees make up
the bulk of their pay. Most mortgage
brokers work on commission and are paid by the loan originator. While this costs you nothing up front, you
need to understand that this fee is rolled up into the overall cost of the
loan. This fee can range from 0.0% up to
0.7% of the loan amount. Then there is
the trailing commission that your broker may or may not get from the
lender. This is much smaller and is paid
monthly to the broker as long you retain and stay in good standing on your
loan. Then there are the other fees. If you terminate or refinance your loan
within a certain time frame (around 18 months is standard) you could be charged
a fee; if you use multiple brokers you could be charged a fee; if you sign the
brokerage agreement and then decide to back out, there could be a fee; should your loan be declined and the
brokerage feels you misrepresented your credit information there could be a
fee; if you are not going big and your loan is under a certain dollar amount
you could be charged a fee.
Using a mortgage
broker may be in your best interest if a) you have good to excellent credit,
b) want to get the most bang for your buck across multiple lending products and
lenders, c) are looking to go in at that very large and expensive
house/property, and d) plan on spending more than a few years at said property,
and e) want someone else to do all the paperwork. Bottom line, it could be worth it but
research your options because nothing is free and you will, eventually, get out
what you put in.
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