The Mortgage Professor
Need a Broker? Avoid the Ones Who Come Looking for You.
In the past 10 years, I have written almost 50 articles on mortgage brokers, but none addressed the most basic question of all: What makes a good broker? Perhaps it took 10 years before I was ready to confront this question, along with its obvious corollary: How do you know a good broker when you see one?
After talking this over with several brokers, I've put together guidelines to help you find a good one. Not all brokers -- even the good ones -- would agree with everything I say.
Loan officers employed by a single lender operate like brokers, except they provide the programs of only one lender. Most of what I say below applies as much to them as to brokers.
Good brokers are selected by borrowers, rather than the reverse: Poor brokers must constantly solicit, whereas good brokers enjoy referrals from previous customers, real estate agents and others. It's not that good brokers never solicit, but the odds are in the borrower's favor if the borrower does the selection.
One test of a good broker is whether the broker will tell a client that a contemplated refinance is not in his interest. The broker who has a constant source of referrals is much more likely to do this than one who bought your name and address from a leads broker. A good rule, therefore: Do not respond to solicitations.
Good brokers are financial planners: Mortgages should fit properly into a household's overall financial situation and goals, which often involves challenging questions. Here is an abbreviated list of important ones:
· What is the best type of mortgage for this borrower?
· How much should the borrower put down?
· Should the borrower pay points or receive rebates?
· Should the borrower raising cash take a second mortgage or do a "cash-out" refinance?
· Should the borrower putting less than 20 percent down buy mortgage insurance, take lender-pay insurance at a higher rate or take a piggyback second mortgage?
· Will it pay the borrower to refinance?