Why You Should Consider The Services Of A Mortgage Broker? By Joseph Shalaby At Isnare.com Ezine Articles

This article offers potential homebuyers a few reasons to consider choosing a mortgage broker to find financing for their next home. According to the National Association of Mortgage Brokers (NAMB), two out of three Americans will utilize the services of a mortgage broker. “They do this because mortgage brokers offer home buyers with more options and a wider selection of loan products.”

There is your first reason. If you have less than perfect credit and have found it difficult to get approved by a traditional bank or credit union, a mortgage broker can present you with more loan options and there is likely one or more options to fit your credit profile. If you have okay credit, the truth is that you may have a higher interest rate than borrowers with great credit, but if you are really set on buying a house, you will be willing to pay a higher interest rate. First, do what is called shopping for the best interest rate. One mortgage broker can offer a variety of interest rates and loan terms from which to choose.

Your second reason to consider the mortgage broker comes from a June 2006 research study conducted by the Georgetown University Credit Research Center (CRC). They found that “a broker may reduce borrowers’ search costs and enable borrowers to obtain lower cost credit than they could find themselves.” This is an important consideration. If you are going to multiple lenders, you will have to pay multiple fees. Don’t be misled by a lender’s offer for a free mortgage pre-approval. To actually process a complete mortgage application, most lenders require a fee ranging from $150 to over $400. After you have paid the fee, the outcome could still be that you are rejected for the loan. Some lenders will refund the fee if you do not qualify. Some brokers will only charge a fee if they are able to successfully write a loan for you. You have to get the details from each firm, lender or broker, to find out what they really charge.

The third reason also originates from the Georgetown CRC study. The CRC reports that the broker maintains relationships with an array of lenders and may create loans for a reduced cost using economy of scale and specializing in certain types of loans. The lower cost is when compared with a lender writing loans in a branch office. One consumer found that her mortgage broker was one of only a few preferred brokers in the state of Florida. Her broker was able to secure her a home loan with Bank of America even though she and her spouse had less than perfect credit.

Now you will also hear criticism of mortgage brokers from consumerists. This side of the issue is also discussed by the CRC study. Among the accusations, CRC reports: “Brokers steer borrowers to higher cost loans that generate higher compensation, do not give adequate consideration to borrowers’ ability to repay, and encourage excessive refinancing of existing mortgages.” The same consumer mentioned above purchased her first home loan with a higher interest rate, but within a couple of years was able to use the same broker for a Bank of America loan with a very low interest rate.

Your decision to use a mortgage broker is important. Compare the services of your mortgage broker with the services of traditional banks, credit unions, and lenders before choosing the service that is right for you. You can also research the reputation of mortgage brokers in your area or get referred by a friend or relative who was happy with a particular broker. Just like every profession, there are good and bad brokers. If you find the right one, it can be a mutually beneficial relationship.

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