question regarding choosing a mortgage broker

Financing, Hard Money Lenders, Private Money
1

Hello all!

I’m new to REI, and am also looking for a house that will be a primary residence. I plan to make that my first purchase (before any ‘investment’ properties), and am about to start marketing to find one.

Also, I wanted to go to a mortgage broker to go over things, and to find what I’m pre-approved at, so that I know what my price range is. I have found an infinite number of mortgage brokers in my area, and had several things I wanted to ask here before contacting them.

First, I want to find one that has a local office, so I wouldn’t entertain any options where I cannot go talk to a real person. I’m going to be calling many to ask them things, and wanted advice on what else to ask them. My questions so far are things like:
how quickly can you close once I find my property?
how many lenders do you have access to?
Any other important ones?

2
My questions so far are things like: how quickly can you close once I find my property? how many lenders do you have access to? Any other important ones?

What are your fees?

How long have you been in the industry?

Do you have any references that I may speak with?

…

3

Without a doubt find out if they are an INVESTOR themselves. You want a lender that understands the financing you are looking for.

Limiting yourself to someone that is local is a questionable policy if you ask me. You want to find the person that is going to be able to get you the best rates, handle closings quickly, and understand what investors are looking for.

4

I agree with Ryan. If they are a good busy broker you are not going to be able to just “drop in” anyway. So a phone call is a phone call whether they are on the next block or the next state.

5
So a phone call is a phone call whether they are on the next block or the next state.

Christopher is right.

The internet allows brokers to work just as efficiently as if they were at the bank. Sometimes more. Most underwriting systems are automated and brokers can fax or email information to the lender.

6

When you say that if they’re good, I won’t just be able to ‘drop in’, do you mean I’d do the entire thing over the phone? I guess I was hoping that when I did my initial application, to get my preapproval, I’d actually be in his office. Do you typically never meet the mortgage broker you work with?

The reason I wanted a local one is so that I could verify they were reputable. If someone were to be doing this for me, but was out of state, I don’t see how I’d be able to know for sure they were legit. A reference is great, but I’d imagine that may be misleading. However, if the mortgage broker is local-ish, I can ask about them at all the local REI club meetings. I guess maybe I should expand my horizons and consider nationwide, thanks for that tip. Couldn’t hurt to give them a chance, surely!

The only problem is that, given this is my first home purchase, I would kind of want to be in an office, to be able to physically see everyhting we’re talking about. Doing that all over the phone just doesn’t seem as reassuring to me (given my infancy in this arena)

7

Also, let me make sure I understand exactly what I’m asking. A mortgage broker basically has access to available mortgages from many different companies, and acts as an intermediary between me, the borrower, and a bunch of lenders. Now, if that’s the case, do all mortgage brokers have the same mortgage menu available? If not, should I be asking how many banks’ / lenders’ they have access to? I guess I’m afraid of going with someone who seems to be good, and finding later that there was a great loan program that they didn’t have access to, which other brokers did, that would’ve been great for me.

(side question - does being a ‘first time homebuyer’ really give me better loan access? I keep seeing that phrase, but it seems that whether it’s my first home or my 5th shouldn’t really matter, given that this is all a numbers game in the end)

8

Sorry to rapid fire questions like this, but I just came up with another. Should I consider talking to two separate mortgage brokers? I know that would run my credit twice, but I’d also be able to have a better array of choices, or somethign that could benefit me.

9
I know that would run my credit twice, but I'd also be able to have a better array of choices, or somethign that could benefit me.

DO NOT have your credit ran twice. After it is run the first time you can ask for your scores, DTI, etc. from the broker. Then use this information to shop around.

I am not saying that you should be dishonest. Let the first broker know that you are shopping around.

10

Ok, I guess I’m going to shoot myself in the foot with this answer, but I like to tell clients that I deal with that one of the advantages of working with our mortgage company is that we are local and you can stop in the office if you have any questions.

As for running your credit twice or more, it doesn’t cost you anything and won’t hurt your score if you do it all within a 14 day window. Check myfico.com for more score information. Most times people tend to leave out critial info like an old unpaid debt that doesn’t really affect fico, but the bank may want it paid off before you close. That’s why it’s better for the mortgage broker to have all the info. Shopping around is the only way to get the best rate.

Ok, here’s some better questions to ask. Are you a correspondent broker or are you wholesale? Correspondent are usually high volume guys and they get a slightly better rate that they may be able to pass onto you. Also when comparing rates, do it all in the same day and maybe even in the same time period. Do it when there’s no news. Check out mortgage commentary at moving.com. Sometimes rates can change twice in the same day.

Fees are also important but it’s rather tricky because even though you should ask for a GFE (good faith estimate) they may not put down all the fees that will be charged such as the attorney fee or they may put down the wrong fee and end up changing it later. Two ways to make money in this game, higher rates or higher fees. I can have the best rate or the lowest fees, usually not both at the same time. Otherwise you’d be doing it for free. Most consumers shop by rate so it’s the fees that are going to kill you.

All brokers could have access to the same bank and they usually get the same rate. It’s more of a question of which ones they’re familiar with and work with often. The other difference is how much they mark up the rate to you. When you shop around, that forces brokers not to mark up their rate that much and you get the better deal. Brokers can have better rates than the national banks because their wholesale rates are much lower than the walkup rate.

First time homebuyer can qualify you for low down payment requirements but doesn’t really get you a better rate, just doesn’t hit you so hard with a higher rate for having a low downpayment. You’d get the best rate if you had 20% down.

Oh another thing about out of state vs local. When the out of state guy has some fee or discrepency in the Hud, you can’t just go down to the office to complain. Had that happen to a client of mine, was a VA loan that we don’t normally do and somehow the figures were an extra $700 over what was quoted to him a few days earlier and they couldn’t explain it. They ended up only crediting him $500. He wasn’t happy with them and as the realtor on the deal, I couldn’t do anything.

Oh this knowledge is from working with the mortgage company that’s also owned by the real estate company I work for.

11

You’ll find that some brokers now come with the added title of “planner”. This is really nothing new, but some like to advertise it as such. Trust me, it’s nothing new.
The reality is, we’ve always been “planners” when the loan is done right.
This could take an entire board’s worth of comments and questions but my advice to you would be two items;

  1. The best rate and/or the best payment may not be the best loan. If that doesn’t ring true do a little investigation into the estimated 200 billion dollars in subprime loans that are on shaky ground. The best rate available may not be the best loan for you.

  2. While you’re shopping, and assuming that you’re not interested in getting a loan that requires a lot of management (neg AM, ARM, Hybrids) look at the amortization of your loan - see where your loan is in 5, 7, and 10 years and compare that to where you and your family might be. The family size could increase, it could decrease. the house may be more than enough this year but in 5 years you may need a bigger on, those are factors only you can predict, not your broker.

Either way, best of luck and call us if you need us, :biggrin

Enjoy

12

Wow! Thanks a ton for the responses, very useful stuff! That clarified everything, I appreciate it.

I have another small question. Someone told me this was the case last night, but I’m unsure if it’s true. They said that when looking at my financial profile for a mortgage (my credit score, cash in hand, income, etc), that my car would count as an asset. I do own it outright, it is fully paid for and nothing was ever bought wiht that as collateral or anything. I can see why it would count, as it is an asset, but I guess I just never consider it an asset because it costs so damn much to keep the thing running (I don’t mean it’s an old junker, but rather just repairs, insurance, maintenance, gas, etc, make me feel my car is a generating liabilities. I guess the whole ‘kiyosaki’ school of thought, not counting a car as an asset, is just burned in my head, even though I can see why my car is an asset. I mean I could just sell it and get cash, so that’s an asset I guess…?)

13

I’m sure there is a lender out there that will do this, but no one I work with would consider your vehicle when you apply for a loan.
The exception being that if you are financing the vehicle, they will count that in your DTI. To you, it’s an asset. To a lender it’s no different than your microwave.

Enjoy,