The last blog ended talking about making sure you find the right broker, but that leaves the question, how do you know who is the right one? You may not believe this (or want to believe this) but most of that responsibility is on you. Truth be told, you’re likely headed for trouble if you enter into the mortgage hunting jungle thinking the broker is your guide. He’s not. He is there to make money, and if you are not going to help him, he is not going to help you. It’s really simple.
Check your credit score and credit report, and get things cleaned up before starting the broker discovery process
The reason for this is pretty obvious: it saves them time and they will know that they won’t have to babysit you throughout the process. If you want to find the worst broker and increase the chances of having the highest rates and impossible terms, go into the process with the mentality that they will do everything for you. The worst ones will – and it will cost you scads of money in the long run.
Take the time to learn the terminology
You don’t have to become an expert, but knowing the difference between the interest rate and APR. It usually is small, but over the course of a 30 year mortgage small will add up quickly. Besides, when you go in to talk to a broker and you sound reasonable intelligent about things, they won’t have to explain every little detail to you. Make their lives easier and it is likely the best brokers will appreciate it and work hard to find you the best deal.
The logical continuation from #3 is to keep looking
Shop around. Though you may be itching to move into a new house, don’t treat it as a race to the finish. That is a sure way to finding yourself paying more, and that “more” will last as long as 30 years.
Be aware of current market conditions
Sometimes the interest rate on a mortgage will differ based on location, but you can use the Internet to find out what the national average is for your general situation. If the offer you’re getting is too high, then you know you need to keep looking for a quality broker.
Use the “preapproved approach” and get a specific number to compare with other mortgage brokers
Don’t just look at the numbers but the total package of fees, terms, and conditions being offered. Getting the best deal is usually a situation which is give and take. You may not get everything you want, but by getting preapproved offers you will better know what you are signing at the end.
The short version of these tips is that the more you come off looking like you have a reasonable knowledge of what you are getting into, and not being too dependent on your potential mortgage broker, the better your chances are of finding the best broker. And again, take things slowly.
Your two main choices when looking to finance buying a home are the bank and a mortgage broker. If you choose to go down the broker route you can find some pretty sleazy characters out there. That means you have to be careful because they can be worse than a bank. But it’s not all bad news, so instead of using this to unmercifully bash mortgage brokers, I’ll be more objective and list the pros and cons. By the way, banks deserve their own bashing session but that’s for another time.
We’ll start off an a positive note here and say that using a mortgage broker can save you oodles of leg work in the mortgage shopping process. Because they do this for a living they know more people and have more contacts that you can find on your own. You might want to ask about their connections just to make sure. But the mistake easily made here is letting them broker do all the work. That is paving the road for disaster. What you’ll need to do is some basic homework on your own and know enough to tell when something is amiss.
One sign of a good broker is when you can’t just pick up the phone and say, “Let’s get together.” The reason is they are working for a select group of lenders, and they know the criteria you need even before being considered. They won’t waste your time, and you won’t waste theirs. Plus, this select group of brokers are likely to have access to very good rates for buyers, and they will not want to be handling an avalanche of unqualified callers just to get the low rate. People talk.
On the downside, instead of dealing with a process you will be dealing with a person. You might think they’re an ass or vice-versa. In other words, personalities can clash and if the broker has a great deal for you that clash can make the process far more stressful than it needs to be. If it closes at all. Often that clash, many times unspoken, is about money because the more expensive the house you buy the more money they will make. It’s something like dealing with a car salesman because they want you to buy the most expensive models while you’re only trying to get what makes you comfortable. It’s just that a house is 10 times the price of a car.
Finally, there is the simple reality that a broker is a financial middleman. They can give you estimates, rates, etc. but in the end they are not the final decision maker. When it comes to money, you always want to be dealing with the final decision maker if at all possible. For example, if your kid tells their friend that you will be able to get them the $100 they want for a new bike from dad, it’s best to talk to dad first. Brokers have their place in the mortgage market but buyers need to know they’re in the right place.