DO MORTGAGE BROKERS COST MORE?

DO MORTGAGE BROKERS COST MORE TO USE?  That's a question I was asked this week and I eagerly answered it. While doing so, it crossed my mind that it is probably a pretty common thought when borrowers are shopping for a loan.

Home financing can be confusing. Having worked in this industry in a "retail" position and now as a "broker", the biggest difference is how well the loan originator explains the process.  No matter where I've worked, my main goal is that a borrower understand the options and that he/she select the scenario that suits them best. As a means of getting there, I'm an educator.

Now to get back to the subject of whether brokers cost more than banks, sometimes a broker may, and then there are instances when the bank costs more. Imagine these scenarios:

      1) A bank has a flat fee for closing costs. Sounds great if that is a low fee of $300 for instance, but here's the first question a borrower should ask: "What is the interest rate?"  If the rate is higher than can be obtained at a broker, what does that extra payment each month add up to in 5, 10, 15 or 30 years? Saving a buck up front can cost dearly in the long run. 

If you save $1000 up front, but you spend that in extra interest in the first two or three years, unless you are moving then, in this scenario the bank cost you more.

      2) Borrowers sometimes go online to get what they think is the best rate - to one of those websites that have four lenders fighting over their loan. The lenders can be brokers or retail lenders.  They are not local, they don't know the market particularly. I would imagine those people are perhaps better sales people, so they can talk around the important questions. Are they going to cost more for the service related parts of your loan because they are not local? They don't have working relationships with local service providers. Are they as brokers or bankers going to cost you more because they don't explain everything clearly?  

I've seen so many instances where borrowers really believed that using a bank would cost less than a broker. There are so many ways for it to happen. One experience I had was a borrower who had such an awesome rate from the bank. He called four years later to tell me he had a five year balloon, thought he had a fixed rate because he was told it was fixed - what they failed to mention was that it was only fixed for five years. He got $1500 savings on closing costs for opting to use the bank.

I like the idea of having a lasting relationship with my borrowers. They've come to know me and  know I will answer their questions honestly. The most frequent thing I hear is "That is the most anyone has ever explained to me." Knowing that a borrower has all the information they need to make an intelligent decision gives me peace of mind.

Again, I liked this question this week. I liked it although there is not a clear cut yes or no answer to it. Either the bank or the broker can cost more or either can cost less. You can't just look at fees, you need to compare loan programs offered, interest rates, their customer service after the fact. And that is just the tip of the iceberg. My answer to the inquiry - based upon our conversation, you should not refinance now, it is not in your best interest. And, compared to the iniformation you gave me from the bank you talked to, NO, I don't cost more.

- Visit my website www.dagriffinfinancial.com for tips about financing. You will see the topic of closing costs covered. Every situation is different, but refer to this website often when you have questions. You'll always find me willing to answer your specific questions about financing.

Dora Ann Griffin  NMLS 6380