If You Hire a Mortgage Broker, You"ll Be Paying His Fees
Mortgage brokers are employed to form a liaison between a would-be borrower and a lending institution. Instead of the homebuyer directly approaching a lender to apply for a loan, a broker will be knowledgeable about many different lenders and the products they offer so that he can help clients decide on the best route for funding their mortgage. In addition to finding the best mortgage package for their customers, they also help with the paperwork and make sure that all of the borrower's assets are displayed in the best light. An honest mortgage broker is well worth the money he receives for his services, but where exactly does that money come from?
The way the system works, lenders who work with the mortgage brokers offer them "wholesale" prices for the loans they sell to their clients. The broker then is able to mark up the price in order to claim a share of the profits. As you might imagine, brokers mark their prices up as high as they possibly can, because there are no regulations on the amount of mark-up they can assay. That's why it's a good idea for prospective homebuyers to do some research about the mark-ups they should expect to pay and then shop around for a broker who doesn't try to take advantage of them. Occasionally if you threaten to walk out on a deal, you might get the broker to take less commission.
Why would anyone want to use a mortgage broker as a middle man instead of going directly to the lender on their own? It feels like you're paying someone to do a job you could do just as well, although that really isn't the case. If you deal directly with the lender, you'll end up paying more for his services anyway, and you probably won't get as good of a deal. Brokers are able to get rates for you that you'll never be able to negotiate on your own. If you have to pay the broker $5,000 for his services yet end up saving $50,000 on the overall term of the mortgage, then the broker fees will seem well worth it. Just be sure that you're getting a deal that will save you enough to cover the extra charges.
Mortgage brokers are in business to make money. You are the client who will pay them for what they do. You want to make sure of is that your broker isn't getting paid both by you and the lender. Some of them try to work both sides of the fence this way in order to rake in more money, so you need to be aware of the kinds of schemes they can pull and call them on it.
The way the system works, lenders who work with the mortgage brokers offer them "wholesale" prices for the loans they sell to their clients. The broker then is able to mark up the price in order to claim a share of the profits. As you might imagine, brokers mark their prices up as high as they possibly can, because there are no regulations on the amount of mark-up they can assay. That's why it's a good idea for prospective homebuyers to do some research about the mark-ups they should expect to pay and then shop around for a broker who doesn't try to take advantage of them. Occasionally if you threaten to walk out on a deal, you might get the broker to take less commission.
Why would anyone want to use a mortgage broker as a middle man instead of going directly to the lender on their own? It feels like you're paying someone to do a job you could do just as well, although that really isn't the case. If you deal directly with the lender, you'll end up paying more for his services anyway, and you probably won't get as good of a deal. Brokers are able to get rates for you that you'll never be able to negotiate on your own. If you have to pay the broker $5,000 for his services yet end up saving $50,000 on the overall term of the mortgage, then the broker fees will seem well worth it. Just be sure that you're getting a deal that will save you enough to cover the extra charges.
Mortgage brokers are in business to make money. You are the client who will pay them for what they do. You want to make sure of is that your broker isn't getting paid both by you and the lender. Some of them try to work both sides of the fence this way in order to rake in more money, so you need to be aware of the kinds of schemes they can pull and call them on it.
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