::How to choose a mortgage broker::

::How to choose a mortgage broker::


You need to find someone who will work with you to find the right mortgage. We'll tell you how to tell whether you need one, where to look and how to tell whether the one you find is the right fit.


Among the many daunting aspects of buying a home — especially for the first time — and one of the most confusing is figuring out the mortgage process. How do you choose a mortgage broker? Where do you look for one? And what questions do you ask?

A mortgage broker is an independent contractor who pairs up borrowers (you) with lenders by scouring available loans to find the one that best fits your needs. A mortgage banker, by contrast, sells you the loans of one bank or lender. Some say the obvious usefulness of a mortgage broker has evaporated in the last two years, as the nationwide mortgage debacle has largely swept the market clean of the variety of mortgages once available and has left banks and mortgage brokers to sell essentially the same, fewer kinds of products.

But there’s still a place for mortgage brokers, say Eric Tyson and Ray Brown, authors of "Mortgages for Dummies." "If you're on the fence about using a mortgage broker, take this simple test: If you're the type of person who dreads shopping and waits until the last minute to buy a gift, a good mortgage broker can probably help you and save you money." Brokers might also have more options for people who have less well-established, or blemished, credit.

In the market? Browse listings and find your dream home

Of course, you still need to choose one wisely. "A good mortgage broker should be surveying the landscape of available mortgage loan programs so that they can match you with the mortgage loan for your situation. And just like in any profession, there are people who are good at it, and people who are terrible," Tyson says.

Where to find them

Where do you even look for a good mortgage broker? You could simply ask friends, but you don't know what you're getting.
"Ideally, get recommendations or referrals from other people you respect," such as a tax adviser or a real-estate professional who does a lot of business in your area and has a reputation to uphold, Tyson says. Even then, "Never blindly accept someone's lender recommendation as gospel," Tyson and Brown write in their book. The reason? People in the real-estate trade may simply refer you to people who "scratch their backs and may not offer the best mortgage loans." What to do? "Whenever somebody recommends a specific mortgage lender or mortgage broker, always ask why," the authors say.


Another place to look is the website of the National Association of Mortgage Brokers, which lets you search for members in your area who have agreed to the association's stringent ethics code. Find one that displays the Lending Integrity Seal of Approval. It's a designation issued by the NAMB that not every member has, says Jim Pair, president of the 8,000-member group.

Here's another rule of thumb: Don't respond to solicitations from mortgage brokers, says Jack Guttentag, a professor emeritus of finance at the University of Pennsylvania who runs the Mortgage Professor website. Why not? "Poor brokers must constantly solicit, whereas good brokers enjoy referrals from previous customers," Guttentag writes.
How to vet a broker

So now you think you've found a broker. But how can you be sure she is perfect for your needs?

First, see if the broker is registered with your local Better Business Bureau, Pair says. Ask the BBB if any complaints have been lodged against the broker.

Next, check with Pair's organization, the NAMB, to see if the broker has any advanced certifications that will prove useful. For those who do extra training and testing, the NAMB offers designations such as "certified residential mortgage specialist," Pair says.

Third, sit down and interview the broker. Here's what you should ask:

"The first question you should ask is 'How long have you been doing this?'" says David Reed, author of "Decoding the New Mortgage Market" and "Mortgage Confidential." Adds Tyson, "Were they selling cars two years ago?"

"I would also ask, 'What other real-estate agents do you work with?'" Reed says. That shows whether the broker is trusted by agents in your prospective neighborhood to get deals closed.


Ask how many lenders the broker works with, Tyson and Brown write. Some mortgage brokers represent only one or two inconsequential lenders — not the kind of broad representation you need in order to find the best mortgage.

"Ask the loan officer, 'Do you offer FHA (Federal Housing Administration) loans?' If you get the answer yes, you've got yourself a candidate," Reed says. If the broker says no, "I'd interview some more people." Those FHA loans are a first-time homebuyer's haven; they're how many people get into a house, he explains. But Reed says many mortgage brokers are not qualified to issue an FHA loan because there are certain requirements that many brokers can't meet.

The best brokers act like financial planners, Guttentag says, taking into account your total financial situation and goals when trying to match you to a mortgage. How do you know he is doing that? Listen to what the broker says, Guttentag writes. He should be reluctant to give blanket answers, but "indicates what the answer to your questions depends on, e.g., whether you should pay points depends heavily on how long you expect to have the mortgage." A good broker will also point to the specific tools — spreadsheets, calculators — that he will use to answer questions about your situation.

That said, "The reality is that very few mortgage brokers have personal finance training, and that's not to denigrate the profession, it's just reality," Tyson says. "People should be educated before they put themselves in the hands of any real-estate person."

Finally, ask yourself, "Does this person speak to me in plain English? Or are they using a lot of jargon? If you can't connect with a mortgage broker, then that's a red flag," Tyson says.

Get it in writing

There are points in the mortgage-hunting process when you can get promises put down in writing. It's always a good idea.

A good mortgage broker will guarantee the lender fees that are first presented to you in the (required) good-faith estimate, Guttentag explains. Ask if the broker guarantees that lender fees won't be higher at closing, and get that in writing.

A good broker also will seek out the best prices for third-party charges such as title insurance, though the broker will likely not guarantee such third-party fees.
Instead, you should ask the broker, "What are your fees?" Reed says – and get that in writing, too.

A frequent cause of complaints about mortgage brokers is that they don't keep would-be homeowners well-informed about the process.

Formalize the lines of communication. "Negotiate an agreement with the broker on both the type and frequency of communications," Guttentag advises. That way, the broker will stay in touch — even to tell you there's no news.

You should also feel as if every step of the process is being fully explained to you and that you aren't being rushed, Pair says. Is your broker not giving you the love? Talk to him, or drop him.