Mortgage broker - how to deal with her - 8 guidelines

We assume that you are interested in only mortgage brokers who are willing to work in the manner set out in the "mortgage broker commitment".  They are brokers whom we label as "service provider" mortgage broker (SPMB). This label is used by us only for convenience in our articles on this site.  This description does not exist in the market.

After you have identified the SPMB you want to retain, you may want to use the following guidelines for dealing with her.

Your Shopping Focus: Once you have retained the SPMB, let her shop the market for you.  She can shop lenders far more effectively and efficiently than you, among other reasons, because she is in continuing contact with many mortgage lenders. Besides, she does this for a living.

Don't Be Deceived by Price Quotes: The mortgage price quote that the SPMB gives you on the day you interview her is unlikely to be the best one you hear, because it will be an honest quote.  Honest brokers can't compete with "sunshine blowers" who ensnare consumers by quoting prices they cannot actually deliver. 

Sunshine blowers will not agree to working according to the "mortgage broker commitment".  Hence you may have eliminated them and ignored their price quotes anyway.

Since prices can change every day, your price quote may be short-lived.  What matters is the price at the time you lock. Your SPMB will give you the best wholesale price she can find at that time.

Pricing the Broker's Services:  Once you and your SPMB have agreed on her fee at the outset, she will fix it, and it won't change.  Paragraph #2 of the "mortgage broker commitment" covers this.  You will have the comfort that you won't get any unpleasant surprises.  Hopefully you appreciate the tremendous benefit of using the "mortgage broker commitment".

The SPMB may price in any manner: a fixed dollar amount, a percent of the loan, an hourly charge for the broker's time, or a combination of these.  Most brokers, however, charge a percent of the loan amount.

Other Factors in Selecting a SPMB: In selecting an SPMB, price is not the only consideration.  You should feel free to query the SPMB about her qualifications and experience.  If her price seems high, ask why she considers her services to be worth that much.  Mortgage broker fees (all mortgage brokers) average about 2% of loan amounts, though it is smaller on large loans and higher on smaller loans.

Referrals may not come by easily in the home loan market, except from real estate sales agents.  Sales agents select their mortgage brokers largely for their reliability.  A SPMB referred by a sales agent would be a good bet.  Even if the referred mortgage broker is not a SPMB by her normal practice, she may make an exception to follow the "mortgage broker commitment".

Be Prepared: Your SPMB may want to have information about the transaction before quoting a price.  The information may be provided in an interview, a questionnaire, or in some other way.  You can facilitate the process by arming yourself beforehand with basic information about the deal. You should include additional information such as current income from all sources, total available cash, and all current debts.

Your Commitment to the Broker:  After selecting the one SPMB and agreeing on her broker fee, you should stick with her, retain her, and let her commence your loan application for you.  Considering that both of you have spent time to exchange information and evaluate each other, it will be a waste of time if you, at this stage, shop for another SPMB.  If your SPMB fails to provide adequate service, you terminate the relationship and start anew with another mortgage broker.

Your mortgage broker's fee in writing: You should have your mortgage broker sign off on the fee in writing (paragraph #2, "mortgage broker commitment").

Your mortgage broker will quote her price to you before submitting an application to a mortgage lender. The price may be a fixed dollar amount, a percent of the loan, an hourly charge for her time, or a combination of these. This quoted price is her total compensation from the transaction.  Any payments made to her by the lender reduce your payment by the same amount.  For example, if she fixes compensation a $3,000 and she receives $1500 as a rebate from the lender, you would pay only the difference of $1500. 

Your broker will inform you if there will be a separate charge for processing by a third party. 

Where your SPMB orders a third party service that is to be reimbursed by you, she will provide the invoice from the third party service provider to support her claim at your request.  Alternatively, she may ask you to pay the third party service provider directly.

Appended below is a sample statement of mortgage broker compensation for you to use:

MORTGAGE BROKER COMPENSATION The total compensation to [Name of SPMB], including any rebates from the mortgage lender, will be:_____________ A separate processing fee will be:____________   Signature of [Name of SPMB] ______________ Date: Signature of borrower _____________ Date:

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