How to Pick a Denver Mortgage Broker

 

Are you looking for a good Denver mortgage broker? A good mortgage broker is golden, but a lousy mortgage broker can literally send a naïve borrower into foreclosure or, at a minimum, cost the average borrower thousands or tens of thousands in unnecessary fees and/or interest. 

 

Watch for application fees and upfront fees
 

Application fees are just another way that unscrupulous mortgage brokers ding naive borrowers. True scam artists charge upfront fees, sometimes to the tune of thousands. The only fees that you should be charged on the front end are fees for the appraisal (goes straight to the appraiser) and a fee to run your credit report. 

 

Beware of mortgage brokers who do not provide Good Faith Estimates

 

A Good Faith Estimate is a document showing the ballpark costs that a borrower will be charged at the closing table. It includes items such as prepaid insurance, the appraisal fee, title insurance and your mortgage broker's fee, to name a few. The law requires mortgage brokers to provide loan applicants with a GFE within 3 days of filling out a loan application. However, a good mortgage broker will provide a GFE without your asking, often before you even make a formal loan application. Pick a mortgage broker who is happy to explain the GFE in detail. A mortgage is likely the largest transaction you will make in your life. It's worth taking the time to understand the fees. 

 

Beware of lowball Good Faith Estimates

 

Watch out for brokers who lowball the charges that are out of the broker's control on the Good Faith Estimate (GFE). Click here to see a sample GFE. The mistake that many borrowers make is that they fail to look at the individual numbers and go straight to the "Total Estimated Settlement Charges," a total located near the bottom of the GFE. Many uneducated borrowers then compare the "Total Estimated Settlement Charges" on the GFEs provided to them by several different brokers, thinking that they are doing a good job of mortgage shopping. You probably guessed it, but a lot of borrowers pick the lowest number and have that broker process their loan.

 

The problem with this approach is that most of the fees included in the "Total Settlement Charges" are out of the broker's control. The charges in sections 1100, 1200, 1300, 900, and 1000 are charges that having nothing to do with the mortgage broker. These sections contain charges necessary to closing the loan such as title insurance, tax stamps, pest inspection, hazard insurance, and private mortgage insurance as well as prepaid taxes and interest. A lot of unscrupulous mortgage brokers underestimate these charges knowing that it will make their GFE look fabulous. The truth is that these charges will remain the same regardless of which mortgage broker you use. Whether the mortgage broker underestimates, overestimates or hits these charges right on makes no difference whatsoever—except that you are going to get the shock of your life a few days before closing if the charges are underestimated.

 

Here is what happens to a lot of unfortunate borrowers. They get two or three Good Faith Estimates from different mortgage brokers. Broker A's Total Settlement Costs are $8,562. Broker B's Total Settlement Costs are $6,062. And Broker C's Total Settlement Costs are $8,789. Which broker will the borrower most likely choose? You guessed it. Super-shady Broker B will likely get the loan. Of course, Broker B underestimated the closing costs by $2,500. Based on the Good Faith Estimate provided by the broker, the borrower has exactly $6,000 in savings to put towards closing costs.

 

What happens in this type of situation is that the borrower will get a call a day or two before closing where a representative from the title company bears the bad news, saying, "Your closing numbers are incorrect. You are actually going to need to bring an additional $2,500 to closing." Gulp. Sometimes the borrower cannot come up with the money, and the loan does not close, meaning the buyer does not get to purchase the house. Misleading a borrower by underestimating the closing costs is unethical, unprofessional and downright slimy, but mortgage brokers do it every day. Brokers who rely on this tactic to get business are also more likely to put a borrower in a bad loan or screw up something due to negligence. Realize that the government will not protect you from an intentionally misstated Good Faith Estimate.

 

There is a simple way for the borrower to compare GFEs. Simply disregard sections 1100, 1200, 1300, 900 and 1000 of the GFE when comparing mortgage brokers. The only time that a borrower should really be concerned about those sections is when the numbers in those sections are significantly lower on one GFE versus another. Low numbers in these sections indicate that a mortgage broker is trying to pull a fast one. If you disregard the above mentioned sections, you can quickly and easily compare the Good Faith Estimates offered by different mortgage companies. Another tip: remain in close contact with your title agent. Your agent at the title company will be the first to find out when the real fees differ from the fees listed on the Good Faith Estimate. Do not let yourself be a victim of settlement sticker shock.

 

Do not think that these sections aren't important—they are. The charges in these sections are estimates of what you are going to have to pay at closing, so review them carefully. It's also a good idea to do your own research to make sure that the charges seem right. Quiz your mortgage broker about how he or she came up with those estimates. Also ask your mortgage broker for a degree of accuracy estimate. A good broker will go through the charges one by one and provide a detailed explanation. One final and very important piece of information: a good mortgage broker will often overestimate these charges—that way the client will be pleasantly surprised when the actual numbers come in slightly lower.

 

Pick a broker who has a good website

 

Good mortgage brokers have good websites. A website is a mortgage broker's first chance to help a borrower. I maintain a website bursting with consumer information to help Denver borrowers through the mortgage maze. A broker's website shouldn't just be an easy way to find a mortgage broker's contact information—it should be an information powerhouse. If a broker's website isn't full of useful information, it's because the broker either isn't trying or doesn't want the borrower to have access to information. In many ways it's easier to work with a client who doesn’t know much. A lot of brokers are scared to educate borrowers, so their websites are nothing more than online business cards. Other brokers are just too lazy to maintain a living website. A good website is almost organic in nature. Fabulous websites require a lot of effort. It's almost like electronic gardening.

 

How many hours does your broker work?

 

Is your mortgage broker FULL-TIME or PART-TIME? This is a very important question because, with daily changes in guidelines and interest rates, a part-time broker might not be up to speed and end up quoting you bad information. You don't want to come in second to your broker's other job. Just like real estate agents, there are a lot of brokers who do mortgage brokering as a sideline. Mortgages are complex transactions, so make sure to pick a mortgage broker who does nothing other than mortgages. 

 

Watch out for application takers

 

When you speak to mortgage brokers, listen to what they are saying. If all they are doing is taking an application, move on to the next mortgage broker! They should be asking important questions such as:

 

• How long do you plan to own the home?
• Have you (and your spouse, if employed) been on your current job for at least 2 years?  
• Do you have an idea of what your credit score is?
• Will this home be your primary residence?
• Do you know how long of a lock period you need? Do you have a closing date in mind?
• Is the property a single family detached home?
• How much money do you have set aside for down payment and closing costs?
• Did you earn your down payment money, or was it a gift?
• Will your loan amount be less than $417,000?

 

These questions—and many more—should be asked BEFORE your mortgage broker takes your loan application. A lot of mortgages "professionals" are nothing more than paper pushers who know little about the complex financial instrument that is a mortgage. Doing business with an order taker could potentially cost you tens of thousands of dollars. Pick a mortgage broker who seeks to learn everything about your situation BEFORE quoting rates or taking your application.

 

What happens if you get turned down?

 

Lenders are tightening their requirements due to the popped housing bubble, so more and more people are being turned down for mortgages. These are people who would have been previously qualified, no two questions asked. Realize that there are two types of people who can help you get a loan: mortgage brokers and mortgage bankers. Mortgage brokers have access to a buffet of lenders, whereas mortgage bankers go to one source for their funds. If you are turned down by a direct lender, you will have to start the entire process over from scratch, including having your credit pulled, filling out a new loan application and re-presenting all your documents. If you get turned down while working with a mortgage broker, however, there is no extra effort required on your part. Your mortgage broker will simply take your loan file to the next lender without skipping a beat.

 

Pick a broker who is interested in your total financial picture

 

Let's say that your daughter is getting married and you need to come up with $10,000 cash. You decide to obtain the funds by refinancing your home, and you call your local Denver mortgage broker.

 

Denver mortgage broker A is thrilled to do a refinance for you. You fill out a mortgage application and start getting your documents together.

 

Denver mortgage broker B asks a few more questions. He finds out that you own a vehicle worth $12,000. He looks at the interest rate on your home loan and determines that it might not be the best time to refinance. He suggests that you take out an auto loan on your vehicle instead and putt off refinancing altogether, until rates drop to the point that it makes good financial sense to refinance. You are a little embarrassed about the brain block, forgetting that your car was paid off. You have grown so used to driving a paid for vehicle that it never crossed your mind to take out an automobile loan. In this situation mortgage broker B doesn't make a dime, but he helps you out by giving you some friendly advice—and saving you thousands of dollars in closing costs. Mortgage broker B also knows that you'll come back when the time is truly right to refinance or when you need to purchase a new home.

 

If the above scenario seems too simple to believe—believe it because it happens every day. Borrowers refinance unnecessarily every day when a truly simple solution to their problem was right under their nose. The point is that you need to choose a mortgage broker who is concerned about your total financial picture. A good mortgage broker will ask a lot of questions. Most deals are more complicated than the one illustrated above, and most mortgage brokers don't do well when deals get complicated. I will be the first one to tell you if I think that borrowing from your 401k is a good alternative to refinancing; most brokers won't present that option. 

 

What makes Wade Young an exceptional Denver Mortgage Broker

 

Mortgages are complex financial transactions. Pick a broker who is professional, informative and who is a leader in the mortgage field. I am a guest contributor to the oldest and most respected mortgage blog on the web. I also spend at least one hour per day studying the industry -- something almost no one does. I have a unique home improvement loan, for example, that almost no one can offer. It allows a borrower to buy a fixer upper and make no payments for up to six months while the renovation is in process. It provides the funds for the complete renovation in one mortgage. Usually borrowers have to buy a fixer upper, live in a dive for a period of time, and apply for additional financing after the first loan has closed. I can do everything turnkey in one loan -- purchase financing, renovation financing and 6 months mortgage payments during the construction. I study the marketplace every day to bring this type of unique solution to borrowers. In essence, I strive to be exceptional at what I do. Lucky for me, I love what I do. I have an MBA from Baylor University with an emphasis in Economics, so I've always loved crunching numbers. I try very hard, however, to put mortgage numbers in terms that anyone can understand. If you are looking for a home loan in Denver, give me a chance to crunch some numbers and see if I can help you.

 

 

Wade Young

Red Door Home Loans

My direct line: 303.800.3648