What are the best questions to ask mortgage brokers to see how good they are? Im about to interview several and find one I can do business consistently with. What questions should i ask? I am also a Realtor, so im looking for one that is best for home buyers and investors. Thanks
Who they are direct with. Alot of brokers are more like referral companies, they just pass you along to another broker. You want to make sure that they are direct with the lender.
And another word of advice, when a broker tells you that they have over 100, 500, 1000 lenders - RUN !!!
In the commercial world, there are only a few lenders. Every deal gets back to them one way or another. You want to make sure you have a direct line to them to avoid additional cost. Furthermore, if your broker is direct, usually that means you won’t pay as many basis points.
First question: “Can I have some money?”
Here’s the question I would ask: “Why should I pay a mortgage broker’s fee when I could just go to the bank directly?”
Mike
propertymanager,
That is a good question and if they don’t come back with a good answer, run as well.
Jordan
Thanks everyone, does anyone happen to have a specific list of questions where i could sit down and just shoot away?
As a broker myself, I prefer the initial interview process to be a give and take between myself and a potential customer. I think you will have better luck having a conversation with a potential business partner than reading off a list of questions. I often get incoming referals that want to know more about me and my business before we work together.
By approaching things in a conversational manner, you should be able to work your questions in, but also get a feel for the person you are interviewing. You are about to consider entrusting your financial success to an individual, so it is equally important (in my mind) that your styles match as well. Personally, I am very low key and laid back (while still getting my customer’s deals done) and I have often referred a 'high strung" potential client to someone else in my office who I felt was a better personality match.
Your basic goal of this initial interview is to test the attitude and knowledge of this person, and generally within the first 3-5 minutes you should have a good gut feeling, but don’t be afraid to conclude your call by asking for some references.
Good Luck!
That’s actually a pretty easy question to answer, because the broker’s rates and fees are lower than the bank!
Brokers also specialize in loans, when you walk into a bank, the guy doing loans may also be spending most of his time opening checking accounts for people. I remember talking to one guy who didn’t understand how to calculate LTV. He thought that it meant that on a home equity you could borrow up to 90% of the equity you had left in your home instead of 90% of the value of your home. The former makes absolutely no sense.
That's actually a pretty easy question to answer, because the broker's rates and fees are lower than the bank!
What? I have NEVER seen a mortgage broker with lower fees than working directly with the bank. It doesn’t make sense. The mortgage broker is a middle man. He basically connects the borrower with the lender and charges a fee for that. The bank still gets paid their fee either way. If you work directly with the bank, you pay their fee. If you work with a mortgage broker, you pay the bank’s fee and the broker’s fee.
when you walk into a bank, the guy doing loans may also be spending most of his time opening checking accounts for people.
I always work with either the bank president or vice-president and they do not spend their time opening checking accounts. One of the keys to being successful in REI is knowing the right people. This does not happen by accident.
Mike
Hey Mike,
That’s actually not true. Brokers that are direct with lenders pay less basis points because of their relationship and business they send them. Sure you pay a broker fee - in exchange for a better rate.
For example the UST 10yr is sitting at 4.89% today, the price for this is 97-310 basis points. If you have a direct broker that has a great relationship with the lender, it’s possible to only pay 97 basis points, however if you have a crappy broker or go to the lender yourself - it’s possible you will have to pay close to full price - which is around to 8%
Jordan
Jordan,
What if you have a great relationship with the lender, pay only 97 basis points, and cut out the broker fee? Isn’t that cheaper?
Mike
yeah ofcourse but chances are 99.9% of people won’t be able to get a better price then a direct broker - they get a steep discount for obvious reasons - specially in the commercial world.
The first thing I would do is select the right real mortgage broker to talk to in the first place. You need one that understands real estate investing. I would go to my local real estate investor’s club meeting and look at their newsletter. The mortgage brokers that advertise there understand real estate investing. I would then ask them to tell you about their investment loan programs. They need to sell you on the program. Then you pick the best plan. Remember that you want o pick the one the closest to taking no money out of your pocket and has no fees and has the lowest interest rate.
Remember that you want o pick the one the closest to taking no money out of your pocket and has no fees and has the lowest interest rate…?
You are not going to find a loan with no fees, but the best rate has an impact I will agree. In addition, fees are not always a bad thing, if you are paying your fees to get a lower rate. Your broker should understand your short and long term goals for each transaction as well as your overall goals, and there may often times be a situation where it makes sense to pay higher fees rather than a higher rate. Again, it should be based on your goals for each individual transaction, but remember fees are not always bad.
Remember, we have to make a living too. 
I agree you have to make a living, but in golf you don’t make every putt, but you still need to try to. Loans are like a balloon, if you squeeze the fees the rate rises if you squeez the rate the fees rise. But you have to know which direction you are pushing. You are pushing every thing lower. If your mortgage broker doesn’t cuss at least 3 times then you left something on the table. Keep the pressure on to get both fees and rates down.
Okay Blue, on a typical investment property deal where an investor will be putting 10k+ in his pocket, (lower end, but still) what would you deem a reasonable amount for a mortgage provider to make?
What if you have a great relationship with a broker and he charges you only a point and gives you the loan at par? Par from a broker beat the banks by a landslide everytime. A point is typically worth about 25 basis points so I guess you haven’t really dealt much with brokers at all. Most brokers try to make two points. Actually your world and my world are probably totally different because the fees the broker makes can really vary depending on if the deal is for 60k or 300k.
The relationship with a mortgage broker is like fable of Androcles and the Lion (and you thought they made you learn about Aesop’s Fables for grins) You have conflicting interests for a mutual gain. The lion wants his paw fixed. You don’t care if his paw is fixed or not, you just don’t want to get eaten up. What I do is appeal to my Broker’s greed in knowing that I will be doing multiple deals. He can try to hit a homerun on one deal and never see me again or do 6 deals in a year. But my $10k is my $10k and I will try to keep as much of it as I can.
The equation includes the mortgage broker, real estate broker, contractor, inspector, appraiser, etc. If I give it all to the mortgage broker, I can’t give it to the other professionals. By the way, I still have a wife to buy diamonds for.
I agree with Henry. Brokers get better rates than retail banks all day long. It does not matter whether you are dealing with the President or the Vice-President. It costs the bank money to pay all those people that greet you when you walk in the bank, and pay for their computers, and all the other associated costs that go along with keeping their doors open. When a broker comes to them with a loan the costs associated with that loan are greatly reduced because we make our money in the origination and the yield. The bank does not have to pay us anything, and the bank fees are an added bonus to them. That savings is passed on to the broker by way of lower rates and higher yield, and then on to the customer. At least most of the time. Not to mention your program selection with a typical retail bank is going to be very small. Brokers have access to literally hundreds of programs with hundreds more variations. Not everyone has the ability to walk into a local bank, ask for the President or Vice-President and then have them actually ORIGINATE the loan for you. You must be very special or you live in a really small town. ;D
Well, I’m glad to hear that others have had better luck with mortgage brokers. When I first started, I tried to use mortgage brokers on several deals and on both sides (and in fact did use them on 2 deals). In every case, my experience with them was TERRIBLE. I found that they were unable to meet the terms they promised and their costs, fees, and interest rates were MUCH higher than going to the bank. On every occassion since, I’ve used a small local bank and the loans have gone smoothly, with better interest rates, lower fees, and the loans get done as promised.
Mike