Before You Hire a Mortgage Broker…
… follow this advice:
Refuse to pay application fees. When interviewing mortgage brokers, make it clear that you won’t pay application or commitment fees. The only fees you should pay in advance are for appraisal ($350 or so, on average) and a credit report (around $20), says National Association of Mortgage Brokers president-elect Marc Savitt.
And Savitt says that locking in your interest rate for less than 60 days should come free as well.
Know what can go wrong. A recent Federal Trade Commission study found that most borrowers don’t understand the fees or terms of their mortgage loan. Don’t be one of them. Ask your broker for the pros and cons of at least three different types of loans, says Steven Krystofiak, president of the Mortgage Broker Association for Responsible Lending.
With any adjustable-rate loan, see that your broker explains how your rate and payment could change and what your worst-case scenario is. The loan disclosures you get will also document how high your rate can go. Make sure they agree with what your broker told you.
Negotiate fees. Once you’ve decided on a loan, scrutinize the closing costs. You’ll find them on the disclosure document known as the good-faith estimate, which the lender is required to provide within three days of your applying for a loan. The estimate should also include the yield spread premium, commonly listed as YSP or POC (”paid outside of closing”).
Pay attention to the total, not the individual charges. Nationwide, the total out-of-pocket closing costs for a $200,000 loan, not including taxes or your prorated portion of bank interest and insurance, average 1.5 percent. If the costs add up to much more than that, ask the broker to cut his fees.
At this stage your only outlay is probably the $20 or so for your credit check and possibly $350 for an appraisal, so you can still credibly threaten to go elsewhere if the fees seem unfair. Once you agree on the costs, ask the broker to guarantee them through closing.
Tolerate no changes. Brokers have no legal obligation to stick to their estimates. But they should do so, or at least notify you of any changes before closing. Request your final papers a day in advance and compare them with the good-faith estimate.
“There should be no surprises when you get to the closing table,” says Savitt. Demand that any changes revert to what was contained in the estimate. If the broker won’t budge, appeal to the mortgage lender.
SOURCE: CNN Money