Talk about forced intimacy -- you can’t shield any piece of dirty
financial laundry from your mortgage broker.
Once you decide to buy or refinance a house, the broker you choose
will, overnight, know more about your financial life than any relative or
friend – or even your lawyer or regular banker.
Of course, in order to represent you honestly to lenders, he or she has
to have the scoop on your credit history (warts and all), your income,
taxes, debt, assets and scary secrets – like a long-ago bankruptcy or
past-due child support payments.
You even have to provide your mortgage broker with proof of your
residency, employment, marriage, divorce, and mere existence. Armed with
this mountain of details, your intrepid broker will wade into the thicket
of mortgages that various lenders might offer you and pluck just the right
one for your situation.
No wonder your relationship with your broker can make or break your
homebuying experience. Get a great broker, and the whole process glides
along. Choose hastily, or for the wrong reasons, and you may end up with a
broker who complicates and slows down the process to an agonizing daily
grind.
"You want someone who will give you a thorough wringing-out (early
on). It may seem intrusive up-front, but then you won’t waste days or
weeks by being submitted to lenders who won’t take you," says
Harvey Jacobs, a real estate lawyer and president of Washington, D.C.
based Stress-Free Settlements, LLC (www.stressfreesettlements.com).
Brokers are popular because, unlike bankers, they represent a wide
variety of lenders. Bankers work only for their own banks. You can save a
little money in fees by doing your own shopping around among lenders, but
a well-organized mortgage broker receives hourly updates on mortgage rates
and terms from as many as 50 lenders and therefore does much of the leg
work for you.
Here are five tips to find a made-in-heaven broker match:
It’s not a popularity contest.
As with any financial service business, mortgage brokers depend heavily
on referrals. But some brokers get so busy with new clients that they are
spread too thin to take the proper amount of time with each client, Jacobs
says.
They’re so busy shoveling in new business that they may figure that
if only half of those clients end up closing mortgages with them, they’re
still taking in big bucks through fees and commissions.
That’s a problem if you’re in the half whose deal falls through.
Seasoned homebuyers may be able to weather the letdown, but first-timers,
especially, need a broker who will walk them through the process.
If your broker doesn’t take the time to ask you probing questions
about your financial history the first time through, when *will* he take
the time? Interview several brokers to be sure you land one that is
committed to sticking with you throughout the entire process.
Kick the tires.
Most successful brokers work with a support team who feeds her new
rates and market conditions, follows up on paperwork, and otherwise helps
to keep the process moving along. Find out what kind of assistants the
broker works with, and then take the time to call them up with a question
or two.
See how long it takes the broker or his assistant to get back to you
via phone and e-mail. And, it’s critical to contact the broker during
reasonable non-business hours with a question such as "how are rates
doing today?" By leaving a message at 8 a.m. on a weekday or 10 a.m.
on a Saturday morning and then gauging the response turnaround time, you’ll
get a feel as to how well you’ll be served if you’re a client.
Make sure your broker will match your urgency.
Because the entire deal pivots on the ability of your mortgage broker
to find you the right lender, right away, slow, lackadaisical or just
plain unorganized brokers can make you tear your hair out.
Janice Silver, executive vice president and sales manager for Bellmarc
Realty Ltd, a Manhattan residential real estate firm, says that a broker
hired by one of her clients didn’t take responsibility for shepherding
the paperwork through the lender the way he was supposed to.
As well, he responded slowly, or not at all, to his own client’s
increasingly frantic calls. With the deal teetering, the homebuyer had to
turn his rental apartment over to the new tenants, forcing him into a
hotel room for a week. Meanwhile, the broker slowly collected the
necessary papers from the bank.
Silver says that incident taught her to be sure that clients get a
broker who will take the effort to extract all the neccesary paperwork
from home buyers right up front, and then submit it en masse to the
best-shot lender.
If your broker keeps calling you for one additional piece of
documentation after another, chances are good that some of those bits won’t
make it to the closing table, forcing a mad rush for missing papers that
the broker overlooked or lost. Better to switch brokers if disorganization
crops up early in the process than have the deal jeopardized on the cusp
of closing.
Ask about fees.
Many brokers ask potential clients to "lock in" rates when
they apply for the loan, by putting up 1 percent of the house purchase
price as a sort of "earnest money." As well, they charge a
nonrefundable application fee.
Whoa Nellie, on both counts, says Jacobs. Nearly all brokers are also
getting paid a commission from the lender, so don’t hesitate to balk at
burdensome additional fees. At the very least, you shouldn’t have to pay
the application fee until you’re actually got a loan commitment, he
points out.
Question the necessity of the 1-percent fee, which has the effect of
preventing you from aggressively comparison shopping for brokers. And be
sure that your broker negotiates on your behalf with the lender to
minimize the chance of surprise fees like those often added at the last
minute for "loan delivery" and "document preparation"
to the tune of several hundred dollars each.
Expect to work with the broker before you put a bid on a house.
These days, houses go to the swift – and the pre-approved, says John
Heithaus, senior vice president of Monstermoving.com, a Washington, DC
based Web site.
"In the old days, being pre-qualified for a loan was a big
deal," he notes. Now, it’s expected that you’ve scoped out the
market sufficiently to know how much house you can afford, and that you’ll
come to the bidding process armed with documentation from a lender who is
already willing to lend you the amount you need to get that particular
house.
And, all that means that your broker has to work with you to get those
approvals in order even before you leap into the fray of negotiations. If
your broker tells you that it’s not necessary to be pre-approved and
refuses to devote the time to helping you get the loan lined up ahead of
time, you might lose the house you want.
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