Many people who are searching for home loans are looking for the cheapest and are open to bait and switch tactics. What we see happening a lot in the mortgage industry, and Bankrate.com is even being sued for allowing this ti happen on their website, is a mortgage company will offer a lower rate and will nto disclose all of the terms. This makes the borrower beleive they will get the best deal by pursuing that lender, only to find out just prior to closing (or at closing) that the loan they are about to sign for is not the same deal as was originally agreed to.
Mortgage companies use various reasons for the difference in rates and fees to justify the change. Things like, your credit score changed, you never locked the rate, when the underwriter reviewed the loan, you no longer qualified for that rate, and the list goes on.
Durign our research to protect you, the consumer, we have reviewed and highly recommend the use of an Upfront Mortgage Broker. They are a group that was conceived by Jack Guttentag, a nationally syndicated columnist and well-known expert on mortgage loans. Professor Guttentag developed the idea as a result of his experience and he has a website that highlights information about UMBs and mortgage related topics. This website can be found at http://www.mtgprofessor.com/. UMBs have agreed to work according to specific guidelines, which can be found at the Upfront Mortgage Brokers Association website.
What is the Difference between a UMB and a typcial Mortgage Broker?
Upfront Mortgage Brokers (UMBs) disclose their fees to customers in advance and in writing. If they receive any compensation from the lender (Yield Spread Premium or YSP), they disclose that as well. Customers of UMBs pay the broker's fee plus wholesale loan prices. Alternatively, mortgage brokers (MBs) add a markup to the wholesale prices and then quote the resulting "retail prices" to customers. Most MBs reveal their markup only in required disclosures after the application has been submitted and some never discloe the exact amount until the HUD-1 closing statement. The customer usually does not see the HUD-1 until the closing table or 1 day prior, and very few know where to look regarding total broker compensation.
The biggest difference is that UMBs interests are closely aligned with their customers. As such, they represent borrower's in shopping for loans. MBs, conversely, shopping the market are often in conflivt with their customers interests. An example would be when a loan type that meets the borrower's needs is not the one with the largest markup for the MB. This is just one example of many where UMBs are working more for the customer than a typical MB.
Additionally, UMBs credit any third party rebates they may receive from lenders or home sellers. These rebates are applied to the orgiginally agreed upon compensation, and may result in lower cash to close. Typical MBs normally pocket these as added compensation and may never be shown clearly to the customer.
So, why would you choose a UMB over a typical MB? Most consumers do not obtain more than a few mortgages in their lifetime and do not have the time to learn everything about mortgages and the mortgage process. The basic nature of this process allows for non-UMBs to "mark-up" the interest rate and/or increase fees during the process. The net result is that the loan would end up costing more than it should.
There is no guarantee that a consumer using a UMB will obtain the lowest rate or lowest fees. But, customers utilizing a UMB will have the best opportunity to obtain the lowest price and will certainly be treated fairly in regards to broker compensation.
If you would like more information about the Upfront Mortgage Brokers Association, vist their website at http://www.upfrontmortgagebrokers.org/. They have a search feature to help you find a UMB that can assist you. Also, be sure to read the post on Mortgage Planner vs. Mortgage Broker that should be up in the next few days. There are a few Mortgage Planners who are also UMBs. This we believe is the best of the best for you, the consumer.
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