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Are Mortgage Brokers a good place to find a loan

Are mortgage brokers a good place to find a loan

By Michael Mapes, The Responsible Mortgage Lender

A few years ago I went out for dinner only to find a gentleman standing at the bar having a drink. He appeared to be in an extremely good mood. So being the ever inquisitive person that I am I had to ask him why he was so happy? He told me that he was a mortgage broker and had just closed a loan that paid him $5,000.00. Now this gentleman did not know that I am a Mortgage Banker but I thought to myself that this seemed like a lot of money to make on one loan, must have been a big loan. So I asked him about the loan and he said that the loan was for 140,000.00 and that he charged the borrower 3 points on the front end and 2 on the back end, the borrower ended up with an 8.5% interest rate. He really was quite proud of himself for this feat that he had just completed. As my mouth took over where my brain left off, I explained to him that how is it that he expects to get referrals from this guy when he just ripped the guy off and how long is it going to take for the customer to realize he got duped? Well he did not seem to care and today some 4 years later he is no longer in the mortgage business, thank goodness.

When a consumer walks into a Mortgage Brokers office or a Bank there are some expectations that go along with this. The first is that the person across the table knows what they are doing and can explain the ramifications of the loan they are selling. The truth of the matter is that most Mortgage Brokers have no real skill other than being a sales man or a pitch man. That is not to say that there are not very good and very honest mortgage brokers out there, there are. But by and large most mortgage brokers have no formal education in financing, No training in the Rules and Regulations regarding home financing and most are more concerned with how to fleece you then actually help you. Unfortunately the ones that are decent and very good get painted with the same brush as the bad ones.

Mortgage Brokers typically tell you that they work with several lenders in order to get you the best rate. While this sounds good and noble it is far from the truth. Brokers shop lenders in order to get a better price for themselves and pass the higher price onto the consumer so that they (The Broker) can make a bigger premium spread. As well as Brokers can not perform the actions of processing or underwriting or closing of a loan. This means that the broker must pay for these services as part of the loan transaction. Therefore as a consumer you are charged sometime thousands of dollars extra in fees for services that a Mortgage Banker provides for free and at a much lower cost of borrowing to you.

Is a Mortgage Broker right for you, yes in fact it could be. They do fill a void that banking institutions can not. However, as a consumer compare real lenders to actual brokers. Real competition between like kind businesses is a good for the consumer and it is good for the market place. Competition makes us sharper, more knowledgeable and holds prices down. This is good for you and good for business.

Michael Mapes can be reached at 757.599.1810 ext 225 or on the web at http://www.theresponsiblemortgagelender.com/

Posted by Michael Mapes-Suntrust Mortgage on 11/07/2007 09:25 AM

Comments (5)

are mortgage brokers a good place to find a loan

This post has been included in Virginia Information Newport News City County, VA Information Newport News, VA Information

5 Comments on Are Mortgage Brokers a good place to find a loan

NOV

2007

I have watch brokers "shop and shop" loans as you say to only benefit themselves and usually these are the deals that don't close on time. As a broker, I have 4 or 5 investors that are my "go tos", yes we have 70 investors, but the "go tos" have the best rate at the best price and we close on time with an awesome rate for the client. 5 points on one deal, what a rip off, I make my little bit of YSP and everyone is happy.

In my opinion, mortgage brokers are a good resource for people who are more marginal borrowers. People who have shakier credit, smaller or no down payments, cannot go full doc, etc. Of course most of those lenders have either tightened way up or are out of business. Thus many mortgage brokers aren't doing any loans right now.

If you have great credit, good financial statements, and a good down payment, why not go directly to the lender yourself.

Michael, Thanks for the review of this important topic. Most agents have several working relationships with lender reps and need to know the differences.

OK so you met a guy who was reeling in his victory of the day! He was feeling high on life because he made a big close. He has a family to feed, a mortgage to pay, a car payment every month, advertising costs, office rental, internet expenses, membership dues to associations he is affiliated with, in the State of Texas he has licensing fees and bi annual administration fees and continuing education corses, fuel for his car to buy so he can go out and find clients, income taxes. Unless he has a magic fairy that delivers him aces, straights and flushes for clients on a daily basis to the point where he can pick and choose he has overhead. I guess you don't have those expenses. Oh and by the way the YSP that was earned on that $140,000 loan was 3.57%. 5% is allowable by law. By all standards he made a reasonable profit for the job he did for the consumer. He may have had to send that loan to three or four lenders just to get him done. We don't know. Guess what my friend? The Real Estate agent on the deal made $8400.00. Why isn't anyone crying about that? That is 6% of $140,000. That was made solely or in concert with another agent. I have too often heard the screems of delight by my Real Estate friends when they close a fat deal. If you want to work for pennies that is your business but don't hate on the people who charge what they are worth! 3.57% is fair. I don't know you and you may be a very nice guy and a tremendous business man. But I won't tell you what to charge for your services if you don't try to tell others what to charge for theirs. As long as the law says we can earn 5% that is the mark I shoot for. Do you think we always make that. I have made 1.5% plenty of times. That means 1% for the house I work for and .5% for me and my family. Don't think that guy at the bar whacks those kind of deals every time he goes to bat. He strikes out a bunch too and he takes real skinny deals too. He may have been on a skid where he hasn't closed a deal in two months and that was the deal that saved his marrige. Be kind for crying out loud. Live and let live. I always get upset when I see people hating on someones prosperity. It spaks of jealousy.

NOV

2007

Good post. I, as a real estate agent, should not be skeptical of mortgage brokers. But, I must admit am quite skeptical. Making a decent commission is one thing...making a client feel as if you did them a favor is not!

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