Monday, June 6, 2011

Mortgage brokers-Why should we use them?

   It's an age old debate-mortgage broker vs. loan officer at the bank.  Which one is better?  Where will you get the better experience?  Who will get you the best rate?  Which one gives you the better service?  These are all the things that go into the decision making of the borrower.  Let me make my case for the mortgage broker:

   In my humble opinion, there really needs to be only 2 areas that a borrower needs to focus on and they are service and rates.  The rate part is the easy one because it is typically a tangible one.  Assuming that the loan officer (that includes the broker and the loan officer at the bank) is not being deceptive in the rate and the closing costs quoted, rates will not really vary by more than .125%.  In some cases, maybe a little bit higher.  The bottom line is, there will not be a tremendous variation on the rates that are quoted.

   It is the area of service where I think the biggest difference lies.  Service encompasses many, many different things and here are just a sampling of them:

  1.  Availability of the loan officer:  The borrower is making the biggest purchase of their lives in a transaction that has many moving parts.  That bears repeating because it's not just words on a page-The borrower is making the biggest purchase of their lives in a transaction that has many moving parts.  If a problem occurs with any number of issues, don't you want someone available at a moments notice to either resolve the issue or put it in the hands of someone that will?  Ask your attorney, real estate broker or friends what their experience was with the person they used.

  2.  What type of property are you buying?:  This is an especially important in the NY metro area where many people are buying a co op or a condo.  As I have noted in previous posts, the borrowers financial pedigree is only half the battle.  If the building isn't approved then the borrower will not get financing.  Is the loan officer checking the status of the building when they first speak?  If they are, it's a clear sign that the loan officer knows what they are doing as is looking out for the best interest of the borrower.  If they are not, look out!!!!  What you want to avoid, is a loan officer that wants to take your application first and foremost before discussing the landscape.  Just 1 example of what a borrower may not know going into the process.

  3.  Explanation of closing costs:  Simply put, the borrower must know their round about closing costs during the first conversation with the loan officer.  If they are not aware of costs, they do not get the big picture.

  4.  Coordination:  A very wise and successful person in my industry once told me that as the mortgage broker, "you are the well that everyone comes to for a drink".  Be at the center of the transaction.  the loan officer must inform everyone all along the way as to what is transpiring.  When the commitment letter comes in, inform the borrower's attorney, the real estate broker and of course, the borrower.  Same for the appraisal and the final clearance from the bank.  Don't leave anyone guessing as to what is going on.

  5.  Rates:  Any good loan officer will give the client options.  Discuss the pros and cons of a fixed rate vs. adjustable.  If the client is headstrong on 1 product then so be it.  With multiple banks to choose from, a broker has a wide variety of options.  There may be 1 bank that hasd the best rate but another may have a higher rate yet be able to finance a larger precentage of the purchase price.  The borrower may choose that bank with the higher rate because they either don't have the extra money for the down payment or choose to finance more because they can use the money in different ways.

  When making your decision, think about all the things I mentioned.  if you haven't experienced it before, discuss it with friends, family, attorney, real estate broker.  Did the loan officer go over all these things?  If they didn't, did borrower really get the best deal or have the best experience?  Do you want to trust the biggest transaction of your life to someone that did not go over all these things?

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