What are the advantages to using a mortgage broker to find you a loan? Or more importantly what services do they provide that I would otherwise have to do myself if I sought out a loan on my own?

A mortgage broker is beneficial in finding the best loan. I currently lend in 38 states and have
over 200 lenders, therefore I can do any type of loan ie... Residential, Commercial, investment, hard money ext. Call me I can get it done for you!

Brian - Thanks for the reply.

What else does a mortgage broker's service provide. I understand that they can draw from a large pool of lenders to find the best rate. I have one currently now and have found two rates that beat his and I found them on my own. Bank of America, my local bank blows his stuff out of the water. I feel like I am getting nickel and dimed with fees and buy downs. I just don't get it. What else is this guy doing for me other than finding a loan. I can do that on my own. What am I missing or not thinking of?

Thanks Dogwood

Your broker could just be greedy. I beat the banks 9 time out of 10, but I'm cheap.

What is he offering (rate, LTV, Documentation type and closing costs) and what are the banks offering?

Patrick -

The rate he is offering is 6.5 with a $2505 buy down to 6.25. LTV 80%, for a single family home. His flat rate is $2500 and I am unclear even at this stage what the exact closing costs are. I know that I need to pay around $61,000 at closing for my down, and total costs at closing. My down in $52,000.

Bank of America will do 6.25% and are running a special of no origination fee. With a buy down to 6.25% The down payment will be $51,800 plus fees and prepaid/reserves which equal around $5000. Total borrower costs at closing $56,850.04. compared to $61,000 and change - big difference in my book.

Wells Fargo will do it for $57,500

Ask your broker what Yield Spread Premium (YSP) he's charging you on the rates he's quoting you.

On loans involving mortgage brokers, banks pay a "rebate" to the broker for charging a higher rate. This rebate is known as the "YSP". The higher the rate the broker offers the borrower, the larger the rebate the broker receives from the bank.

Sounds like your broker is guilty of "rebate abuse." Every industry has it's bad apples (real estate agents included) - shop around not only for the best rate, but also for integrity of the mortgage broker or lender you work with. Otherwise, you can get burned... Good luck.

Damon got it right above. it basically works this way:

A bank offers a loan to brokers. let's say it's a 30 yr, fixed rate loan at 5.875% (5 1/8th). And they offer that loan at "par." Par means there are no costs, but no rebates either. OK, what does that mean. Well let's step forward to step back. The bank offers the same loan at a 6.125% rate with a 1 point rebate. that 1 point is the "YSP" damon mentioned above. That means this: The bank will PAY THE BROKER one percent of the loan amount if he can sell you the loan at 6.125% instead of 5.875%. If he gets you the loan at 5.875% (par), then the bank pays him nothing. THAT is the rebate. Now, if that broker can sell you the loan at 6.25%, he might get a 1.5 point rebate. At 6.5% he gets 2 points, and so on. (I'm just using round numbers for simplicity...the rebates don't usually hike up that fast). Now here's the rub...chances are, he can get you that loan at 5.75% or even 5.5%. But if he does that, there's a cost. You (the borrower) would have to "buy down" to that rate. It might cost you 1 point up front (1% of the loan amount) to buy down to that low rate.

Now...when the bank pays a broker or loan officer through a "YSP," that's called getting paid on the "back end." Any fees (origination fees, broker fees, etc.) the originator charges to the borrower up front are called getting paid on the "front end." So, mortgage professionals can get paid two ways: on the front end from the borrower or on the back end from the bank. OR BOTH!

Now, I'm not explaining this like I'm trying to say the broker or the bank is doing anything right or wrong. Mortgage folks get paid on both ends all the time. It's just one way of doing business. The greedier ones will give you a rate that pays them well on the back end and will charge you front end costs as well. Some folks will ONLY get paid by the bank. And some will ONLY get paid by the borrower. And some get both and are very fair about it. (like me ) Sometimes a broker charges more because he's so dang busy, he needs to thin the herd and he's in a position to do it. i know brokers here in the Miami area who don't do loans less than $500,000. God bless 'em.

So who is better? Well, that depends on your perspective.

Which is a better deal?

$200,000 30 year fixed rate loan at 6.5% that costs you zero in origination fees. (NOT closing costs...that's different)

OR

$200,000 30 year fixed rate loan at 5.875% that costs you $3000 in fees? (again, NOT closing costs, that's still different)

It all depends..and this is how I, and others like me do business. I would say this to you:


Dan: Patrick, I can get you the loan you want at 6.5% or at 5.875%, but the lower rate will cost you $3000 at closing. (1.5 points)

Patrick: Wow, that sucks. Why is that?

D: Well, at the higher interest rate, the bank will pay my fees. At the lower rate, I'd have to pass my fees on to you since my family needs to eat.

P: hmmm..I see. Which is a better deal?

D: Well, let's look at it this way. How long do you plan to own the property?

P: Three years. It's a starter place. We want another kid so we'll need a larger place in a few years.

D: Then take the higher rate loan.

P: Huh? Why would I want the higher rate?

D: Well, to get the lower rate, you need to spend $3000 today. If you take the higher rate, the bank is paying me the $3000, which means you save that money for now. At the higher rate, you'll pay $1231.43/month P&I. At the lower rate, you'll pay 1183.08/month P&I (Principal plus interest). That's $48.35/month difference. If you divide $3000 by $48.35 you get 62. That means that at the higher rate, you'd have to pay into this loan for 62 months ( a bit over 5 years) to spend the same $3000 you're spending TODAY to get the lower rate. If you sell the place in 36 months (thus paying off the loan), You'll have spent $48.35 x 36 which is $1740.60. So, taking the higher rate actually SAVES you $1259.40 over the next 3 years.

P: Wow, Dan, you're amazing.

D: It's not me, it's the calculator! There's more!

P: There can't be!

D: Yes! If you told me you were going to live in the place foe even 5 and a half years, i'd suggest the lower rate because it would cost you less over time.

Also, if you're SURE you're going to be there 3 years and not 2, then we might be able to save you more money. If you're willing to take a prepayment penalty for 2 years, I can probably get you a better rate. This would be a soft prepay which means you can sell the house, but not refinance it. if you refi in less than 2 years, you'll pay a penalty. but you plan to get out in three years, so it shouldn't be any big risk at all. I might be able to get you 6.25% if you take the prepayment penalty.

and so on...

You see, all I want to make on the deal is 1.5% of the loan amount. $3000. I don't care if you pay me or the bank pays me. Heck, like I said, I could probably do the deal for 5.5%, but then you'd have to pay me the $3000 i charge PLUS the amount to buy down to that rate, which I'm sure is probably 4-6,000 bucks. But that doesn't mean it's a bad deal. What if you just got a $20,00 inheritance? Maybe you've got the cash and you want low house payments. Stay in the home long enough and you'll end up saving a couple hundred grand by spending 20.

My long winded explanationcomes down to this...the deal may or may not be better based upon rate.

OK, that said. The difference between brokers and banks:

Brokers shop your loan "to get the BEST rate." (notice I didn't say LOWEST rate)

Banks give you their rate and that's it.

Upside of brokers...the best rate might in fact be the lowest. With lots of banks to choose from, there's a chance of getting a better price. Also, if a problem arises during the loan process, the broker can try another bank quickly, rather than YOU going in search of another bank.

Downside of brokers...The BEST rate might (if you're dealing with a fair-minded person) be the one where the broker gets paid what he wants and either does or doesn't pass the costs on to you. However, the BEST rate might also be one that sounds low enough, but pays a good rebate and he knows he's got you for the broker fee as well so he walks away with $7 grand on the deal and no one's the wiser. How the heck do you know the rates at First bank of Schenectady? There's also this trick: "Hey, I know we were getting you 6.25%, but your credit score dropped 10 points when they checked the tri-merge. that bank can't do the loan anymore, so I had to go with the next best thing which gets you 6.5%. It's only $30 more a month, so no big deal." Well, that no big deal is your problem not his. What does he care? And he could have done the loan at the same rate with the new credit issue, but his rebate might have dropped to .5%.

Upside of banks: They're generally cheaper in fees and maybe rates. that's because they generally pay their loan officers a flat rate or flat fee. No matter what rate the LO gets you, he's getting paid his amount so he has little reason to bump the rate up on you.

Downside of banks: No matter what you discuss with any broker or LO, in the end the inderwriters make the decisions. So if you don't fit their little "box" you won't get the loan. Then you begin you search all over again. Bigger banks have very strict rules to follow. BofA or CHASE or Citi all have great loan programs, but they do som many loans a year, they don't HAVE to accomodate everyone. they can deal with Mr. 760 credit score with $150,000 reserves in his checking account. When Mr. 639 FICO with $2200 in his checking comes along, they know that First Bank of Schenectady is there for them. they don't have to bend. Smaller banks are more flexible, but you generally have to take your broker's word for it.

Look, you're doing the right thing shopping around. Your Good Faith Estimate should include all known costs (taxes, escrows, title company fees may still be unknown, but they should ballpark them for you).

Decide how long you're keeping the place. Ask about ways to save money (prepayment penalties, temporary buy-downs, etc.). If you know you're moving in a couple years, ask about an ARM, or even the option arm if you're a bit of a dice-roller.

The mortgage broker saves you lots of time because he knows the packages and he knows the banks. There's probably no way you could do exactly waht he does, but you may not need to. if you're happy with a big bank, go with it. If not, tell him your concerns and see what he'll do. And there are hundreds of thousands of brokers...you don't NEED to deal with him.

Sorry if this got wordy, but it's a lot to explain. i hope it helped.

Good luck,

Dan

p.s. Again, for simplicity, i left out taxes and insurance/maintenance fees on the monthly payment. That would factor in to your decision, but I was just trying to make a point, not teach a mortgage math class.

As far as what a MB does for you vs. what you can find on your own - if you know exactly what you want and are fairly vanilla, ie, a conforming 30 yr fixed then maybe you can do better shopping on your own. But as Mr. Cook points out, how do you know that the loan you are shopping for is your best option for your situation? When choosing a loan officer is it best to look for the lowest rate quoter or someone who provides a little more value by taking a consultative approach? Many homeowners in this country are in the wrong mortgage because they looked only for the lowest rate quoter. I think you wil find that a broker is better choice as a consultant because a) they have a much, much larger choice of products to offer and b) most of the more experienced LOs work for brokers because they can make a much better living there. Banks pay less so it would only be logical that they get a lower quality LO, generally speaking of course there are always exceptions.

And Damon could you please explain more what "rebate abuse" is? It would seem to me that a broker can charge any rate that they wish (within legal parameters) and like any other product in this world if the consumer doesn't think they are getting enough value to justify the price then they can go elsewhere. No one gets abused unless they allow themselves to be. Is charging 6% to list a home vs. 5 or 4 or 3 "commission abuse?"

Thanks for the replies.

I had no idea that brokers got rebates. I was under the assumtion that a mortgage broker is going to be working for me to get the best deal for a pre-specified rate. I thought that when I was buying points that this fee was from the lender and not to cover the brokers lost rebate.

Here is my perspective. I hired a broker to find me the best deal possible - one that I could not find on my own. And I agree to pay a flat fee of $2500 to do this. But in reality, they don't find me a better deal. They find me a pretty good deal - but one that is also a good deal for them (one that has a rebate). How do I know that the broker hasn't found two loans - both the same rate, but one has a rebate and the other does not? Which one will he pick? And why aren't brokers up front and tell me that they also make money from the lender as well as me?

All I really want to do is pay someone upfront a fee for their service and trust that they will find me the best possible deal that they can. I do not want to deal with a used car salesman type situation. All I ask for is a bit of honesty and integrity - or I will do it myself. Dogwood

Well two things:

1. You kind of contradicted yourself here. In the first paragraph you state that you want to broker to find you "the best deal for a pre-specified rate." Then in the next paragraph you state "I hired the broker to find me the best deal possible." Did you ask for a specified rate or not? If you simply said "Find me the best deal," then that may not necessarily be the deal with the lowest rate.

2. If the broker finds you two perfectly good deals at your specified rate, then what do you care if he gets a rebate? If you choose the rate and he finds it, then it doesn't really matter if he's getting paid on the back end because your payments and rate are the same. It's kind of hard to say "Find me x%, but don't make more than $2500, ok?"

What you probably mean (I hope) is that you said "Look, I'll pay you a flat fee of $2500. You find me the lowest rate and best deal I can get with a credit score of xxx, full documentation, $xxxx in reserves, $xx,xxx/year income, etc..." Now that is a perfectly fair transaction. You can even add in "And if you get paid on the back end, I want that amount rebated to me if that's legal in this state." If the broker agrees to this (and if you're not some guy with multiple bankruptcies and lots of cash with no explanation for its existance), then I'd probably take that arrangement myself.

But just because a broker might get paid a small amount from the bank doesn't make him dishonest. As long as he's doing what you asked and what he agreed to, then he's fulfilling his side of the bargain. Now, if he wants referral business, then he should explain all the ways he's NOT getting paid anything more than the $2500 you gave him. Then you're his biggest fan. That would make good business sense.

But look, there are plenty of perfectly honest used-car salesmen out there. There are plenty of brokers who will do a great job for you. If you go into the deal expecting to get screwed, then you're just going to give yourself ulcers. Talk to your guy. If you trust him, do the deal. If not, find someone else. Tell them you'll pay them $2500 to do the deal and you want the best rate he can get, and you want to see the rate sheet. Make him prove it. if he can go a bit lower if he does the loan for "par" then ask him to do so because that's what he agreed to.

Good luck,

Dan

Rebates must be disclosed by MBs on both the Good Faith Estimate and the HUD 1. Some states may require additional disclosure.

What you seem to be talking about is a flat fee broker. They are few and far between and again are probably not the best mortgage guys, people who are good at what they do usually don't work for less than others.

Why don't you shop for a mortgage like you would shop for an accountant, chiropractor or other professional service. Once you have found the best value (combination of quality and price) then you've got it and you don't really need to worry about how they are getting paid.

Ok, how is this. I want the best deal. It seems to me that If the rebate is passed on to me, that would be a better deal than if it wasn't. A good deal to me is lowest possible closing costs and the lowest rate. I am comparing apples to apples here. In other words if a lender is offering say 6.25% with say $3000 in closing costs. That would be better than 6.25% with $5500 in closing costs. Which is precisely the situation that I have here. Now if he has a slightly higher fees and a lower interest rate and I am going to be in the house for a long time, then sure, I understand that that is a "better deal."

dcook22 - I don't think that I contradicted myself, I just didn't explain that what I truely am looking for is the best deal for my situation. Planning on being in the home for a very long time, I am comparing costs for a specific interest rate. Now if he can get me an even lower rate, then his fees become more justifiable.

If getting paid on the front end and the back end is the way that mbs do it, then so be it. I would have liked to have been told that by my mortgage broker. It seems wacked to me that a mb would offer me a loan with a several thousand dollar buy down fee when he has access to a loan with the same interest rate without a buy down fee.

I didn't go into the deal expecting to get screwed. In fact I went in with many recomendations and a high degree of trust. I was told by my broker that he couldn't be beat. I trusted him. My realtor was the one who brought this to my attention and told me that I should look into it.

SD - I never did get a good faith estimate. I must admit, that up until now I have been a little naive and you guys have been extremely valuable in getting me up to speed. Thanks to all of you guys.

SDmortgagepro-

Fees are relative. If all brokers get paid about x amount then fine. They should tell me so. The ones who provide the best service should get paid more. They ultimately should be getting me the best packaged deal. That is what I hired them to do and that is what I pay them for.


I will in the future compare the "value" that different brokers are offering. I just don't have the luxury of time now. We are closing in 14 days and the clock is ticking.

Thank you all again for your insight.

Dogwood..Oh My GOd!..If you're really closing in 14 days and dont have Loan Committment let alone a clear-to-close then you have only two choices. One go to your bank, a real bank, and beg them or see if they will get it done for you in time. There's almost no way to get burned doing that, assuming you have no credit, ratio, collateral, etc. and million other possible issues. You are setting up close to be a disaster because you have no laon yet. There is a process to it. I can see what's gonna happen. On closing day your going to have two agents there looking for funding, if it happens it wont be timely and the lender is going to get reamed because your got your loan last, not first. Big mistake. Hope it works out but get a loan app in and rate locked tomorrow.

Yeah, Dogwood. I'm glad we've been some help to you, but 14 days is rough. My company regularly closes loans in 7 days, but that's with no issues. One of the biggest time eaters is the simple verification of deposit that lenders require from your bank. It's a simple piece of paper that confirms you have the amount of money in the bank that you say you have. The trouble is, banks wil sometimes take up to 10 business days to get it back to you.

Anyway, there's a group of Mortgage Brokers that function the way you're describing. They're called UpFront Mortgage Brokers (a term coined by Dr. Jack Guttentag, A.K.A. The Mortgage professor ). You can search tme by state here: http://www.upfrontmortgagebrokers.org/search_umb.asp . I'm not sure you've got the time, but maybe they can help you out too.

Good luck.

Dan

Dogwood, and another thing, since youve been shopping like crazy you should know what the current rate are (ie 30 yr fixed). It may vary a hair lender to lender, and that is influenced by time of day becasue there can be rate updates throughout the day. If its a 6.5 market because the 400 lenders you called quote about the same thing, then good God man lock! You cannot catch a falling knife and be certain to get the absoluat elowest number that moment, otherwise youll wait until 14 days before close...oops..you did. Sorry man I am not attacking you, but youre doing it wrong, creating a nightmare for everyone involved in the transaction, then we wonder why agents and LO's get mad at each other. PS dont call me Monday for a loan, I stay out of the way of trainwrecks about to happen. Maybe someone else here wants to be his hero, not me. Too unrealistic.

LoansEverywhere -

I don't think that you fully understand my situation. You are making me out to be the bad guy here. I do have a loan waiting at title for me to sign and it sucks. I was told to look into it and that the fees are extra-ordinarily high. I am not trying to catch a falling knife - just trying to not get the wool pulled over my eyes. I don't know about you but $3000 extra dollars at close and no change in interest rate is a lot of money. Again, I have a loan at title waiting for me to sign. That is not the issue. The issue is have I been taken advantage of and is my current broker willing to make things right. What would you do if you are average joe borrower and your realtor says - "hey, red flag here - might want to check the numbers - they seem very high"? By all rights I should be an easy loan (I think) 807 credit score, no debt other than my mortgage, great income. Maybe I am missing something - I am not the expert here (you guys are). But I hardly think of this as me causing the "train wreck" and I am not the one "creating a nightmare for everyone." I am just simply making sure that I am not getting hosed. I am just a consumer looking to be treated fairly. Is that too much to ask. P.S. I wasn't planning on calling you. One more thing. I am not attacking you, but your post doesn't describe my situation.

Hey Dogwood, you do have 14 days. That is certainly not an impossible amount of time in which to get a new loan, especally with your credit/debt-to-income ratio/income. You can still shop it around. You could also talk to the seller and ask if they'll extend closing for a week or so. It's not like you're closing at noon tomorrow. Try dropping the hint that you're in the market for a new loan from someone else. See if your guy will make changes. The only thing is if this broker acted in good faith you can't just drop him. He earned a commission. There's no need to get sued over it. You can always talk to an attorney, but I don't know how much you'd want to get into it. For the money it might cost you to get out of the deal, you might as well stay in it since it's not the deal you hate so much as the fees attached to it. Caveat emptor and all that. Don't get yourself sued, but talk to the guy. MAybe he'll work something out with you. There's one basic truth he should have in mind. People hang around and associate with others who are like themselves. This means that if you've got a great job and great credit, chances are your friends and/or family do too. Point out the quality of the potential referrals that can come from your sphere of influence. Maybe he'll decide it's worth giving up a grand or so on this deal for you to recommend him a few other loans. Just an idea. But consult an attorney before you do anything that might violate an agreement.

Dan

Dogwood--Sorry, never saw you disucss having a loan approved. That said, can you list what the $3000 fees are? Sounds like title co. has everything already. Let us help by seeing if its junk fees or other such as state or county related transaction fees. Looked at your profile and it doesnt say where youre located. Bottom line is what on the GFE now that wsnt on th original one. Some things will change like days interest, escrows, other legit fees if those numbers werent available at application. Let us know and I'll reply this evening.

LoansEverywhere - The fees are $500 difference between the flat rate origination fee and everyone elses 1% origination fee. And $2500 buy down fee that no one else charges since interest rates have come down on their own. I got a GFE over one year ago for a construction loan and haven't seen a new one since. Thank you for replying to my post, and I am sorry for not being all that clear in the begining.

I have had a turn of events though. My broker has taken the high road and told me that he has found a better loan with a better rate and no buy down fee. Closing costs are going to be $2500 less then the previous loan and the interest rate will be 1/4% lower than the original buy down rate. I am told that docs will be to title this week.

I will keep you posted on how it turns out.

dogwood

Dogwood..sounds like you going to get a decent deal to close, at least the one you should have gotten in the first place. I say that because the sudden turn of events has a bad smell to it.

First, origination fee is something the broker adds to the loan to generate his profit. Profit is okay, all loans are profitable, however he didnt just magically find a different program. It was there all along and he was waiting to see if he could get away with it. You called him on it. Most wouldnt. This is just not a cool way to do business. Im sorry but I have an axe to grind with brokers.

The bad ones hide behind the vail of "we shop for the best deal", only to try to get origination and other fees until theyre called on the carpet and the magic "another" program pops up. OR the one that leads his purchaser to believe he's getting a 6% loan, only to find it marked up to 8% at close when they are stuck. It gives everybody a bad name. With all that said, I of course dont have a problem with profit. And its wrong for the consumer to think theyer getting a free loan. I just cant tolerate the lyeing when all you need to do is be upfront. If the customer doesnt like it they have other choices just dont try to screw them. Good luck in your new home!

You need to find the person that can get the deal done and helps you build a relationship with the client. It can be your in house person or the broker down the street. We all have the same products, you need to look for service.

SDMortgagepro,
It's not the amount of profit brokers make that I take issue with, rather it's the lack of transparency, and the shell game many brokers like to play with their borrowers.

You wrote:
“Rebates must be disclosed by MBs on both the Good Faith Estimate and the HUD 1. Some states may require additional disclosure.”

C’mon, GFEs often times aren’t worth the paper they’re written on, and by the time the borrower has access to the HUD1, it’s too late to change.

You wrote:
“No one gets abused unless they allow themselves to be.”

Great attitude. I’m sure your borrowers would be happy to read that...

Also pick Mortgage Brokers because were Fun! We are good at surfing and other exciting outdoor sports. Bankers are weak people with tiny spines and soft skulls.

LOL TNMortBroker!!
That's too funny! And true...

I can't stand people like you.

Quit wasting your time and go close the best deal that has been offered to you. Also didn't your realtor negotiate some of the closing cost to be paid by the seller?

I actually tried reading this post, but it is giving me a headache.

I didn't ask.

TN Mort Broker -

You may have tried to read this thread but it is obvious that you didn't. The only time being wasted here is mine trying to explain it to you.

And no, the realtor did not negotiate that some of the closing costs be paid by the seller. Again this is not the issue. The issue is ... Ah forget it. Take some advil and go read it yourself.

Hey Maric - what would you do if your realtor said - hey, the fees are really high - you might want to look into it? If you say that you would take the brokers word for it inspite of what your realtor says then I have some Ocean front property in Kansas to sell you.

You guys are exactly who I do not want to do business with.

To all else who have actually contributed a helpful response, Thank you. I sign loan docs today and I saved $3100 in closing costs and got a 1/4% lower interest rate.

That was helpful

Hey man I was just trying to lighten up the situation a little bit. Sounds like you got what you wanted and have closed your loan. Congratulations and enjoy your new home.

Thank you. We will enjoy our new home very much. Sorry I took your post wrong. I guess that I was just a little on edge with a couple other's posts.

Thanks again to all that helped. We signed today and feel very good about it. It is nice to have people that are in this profession willing to help out.

Yeah the MB industry is full of bad apples, same goes for realtors too though.

You sound pretty smart so I"m sure you already had an incling your MB wasn't being totally honest with you, and if he truely was gouging you it's completely your right to question his fee's.

Next time though SHOP FIRST. Don't sign all your paperwork, make the broker start ordering appraisals, title, argue with underwriters, ect; then come back 15 days later and say, I found someone better.

Now if the LO did his job well and wasn't gouging you you shouldn't have been able to find anything significantly better anyway.

Sounds to me like your MB was trying to make a few extra bucks on you but since you called him out he lowered what he was making.

Congratulations and ENJOY YOUR NEW HOUSE!

How come mortgage broker never point out to a borrower that the realtors fees might be "little high"?

My 2 cents...

If you are going to shop the MB's rates or GFE give him an equal chance to compete with your banks offer. If you are using your MB's GFE to compare to banks and giving them the opportunity to beat your MB's GFE give the MB the same opportunity. A big difference between me as a MB and the local bank is service. I don't close at 5 pm. I am available anytime via email and most of the time via phone. I will close your loan faster than any bank (at least I have so far). I don't get paid salary so I am motivated to close your loan quickly. Salary motivated loan officers at banks will not be as motivated to close your loan and are can't wait for 5:00 pm to hit the door. I don't look at the clock. I can shop your loan with over 200 lenders and get you a better deal than a bank almost every time. I can give you options some of your local banks can't (pay option arms, interest only loans, 100% NOO, No Doc loans, Commercial Loans (stated/stated) and the list goes on. Competition is good for business. Next time your not happy with your MB keep shopping. Every MB has a different way of doing business. If they want to beat your banks GFE (if it makes enough revenue for them to take the loan), they can. I would point out again that most banks will not close your loan as fast as an MB (at least not me).

MB for life,

5Kids,

I can't speak for every bank (nor can you speak for every mortgage broker), but I was a loan officer at the 3rd largest bank in the country and let me shed some light on how we operated at my bank vs. what your wrote:

You wrote:
"A big difference between me as a MB and the local bank is service. I don't close at 5 pm. I am available anytime via email and most of the time via phone."

We didn't close our doors at 5 pm. Personally, I was there many times until 7 or 8pm. Also, we each had laptops we took home with us at night and on weekends. And being available by phone anytime was a given - our business cards had our cell phone numbers on them.

You wrote:
"I will close your loan faster than any bank (at least I have so far)."

On purchases we could do them in under 2 weeks - and that was mostly due to the appraisers. On refi's I will concede we were pretty slow - the last few years we wouldn't do them in under 30 as our focus was mostly on purchase transactions.

You wrote:
"I don't get paid salary so I am motivated to close your loan quickly. Salary motivated loan officers at banks will not be as motivated to close your loan and are can't wait for 5:00 pm to hit the door. I don't look at the clock."

Every loan officer where I worked was on 100% commission. Trust me, we were very motivated to close loans.

You wrote:
"I can shop your loan with over 200 lenders and get you a better deal than a bank almost every time."

I always loved hearing MBs use this one. Out of the your 200 lenders, how many do you typically use? Maybe 5-10? Also, I'm pretty sure most MBs are shopping the best combination of rate AND yield spread, not just rate.

You wrote:
"I can give you options some of your local banks can't (pay option arms, interest only loans, 100% NOO, No Doc loans, Commercial Loans (stated/stated) and the list goes on."

We had interest only, true no docs & every shade of low doc in between (stated, no ratio, nina, etc.). We did not have a pay option arm - and was glad we didn't. We didn't have low doc commercial, but could broker that out.

I've worked for a local broker shop, a large national lender and now a small yet reputable local bank.

To be honest we have every kind of loan available (although admitedly we're not as competitive on sub-prime, can close deals quite quickly and work on 1005 Commision so we are very motivated.

Tomato tomahto really.

HomesbyDamon,

In regards to banks, most close at 5pm.

Most don't have laptops they take home.

Most don't work till 7pm.

I close loans faster (refi's and purchases).

Most banks pay salary (maybe with bonus's).

I could beat your deal every time if I wanted too.

So what on the ysp part? If I get a better rate than the bank. Many of my clients were turned down by not only one BANK but 2 BANKS. I get them closed. Banks can't compete. I don't know what the #'s are but I bet more originations are done nationwide via MB's. If they are not they should be.

MB for life,

Nobody locally beats me on a purchase..nobody..I make enough on refi's that we blow the brokers and banks out of the water on purchases. Period. Its simple economics.

Mark Osborn
Countrywide Home Loans
O Fallon Missouri

Send you next client to me and we will see. I will take you up on that.

My guess is that the borrower could care less since the seller is the one paying the realtor fees. As a borrower, I could care less what the realtor fees are. I am looking at the bottom line - "Do I want that house for the price that they are asking" If yes - I buy it. If they are passing on an unusually high realtor fee - I simply look elsewhere.

The Realtor costs are already built into the price of the home. Technically, the seller is paying it, but you better believe they factor in the cost of the agents in how they priced the home. Consumers tend to focus on the mortgage side more because the cost of the loan is more visible than Realtor commissions.

Most consumers step over dollars to pick up pennies.

www.smartmortgageadvice.com

Russ..You got that right!!!

Yes, they do factor in the realtor costs when selling their home - I do understand that. But I know that if I am looking at listed homes, I am paying a built in 6% fee. If I didn't want to buy a listed home, I could easily buy a for sale by owner home. (which in my area are not any cheaper) There are advantages to using a realtor on the buying end. In my case, he saved me $3100 and a 1/4% lower rate.

I wasn't aware and haven't seen a diffence in realtor fee commissions. Most if not all that I have seen go by what seems to be an insustry standard. There are no variable fees that a realtor can pad to make a few extra bucks. It seems that a broker has alot more opportunity to make extra money from different fees and yeilds. And I will add that there isn't anything wrong with that if they are totally upfront.

quote - "How come mortgage broker never point out to a borrower that the realtors fees might be "little high"? "

SevenAteSix - I don't know. Why don't they?

Russ - I tend to disagree with a loan being more visible than realtor fees. For me, the realtor fee was very cut and dry - 6%. As for the mortgage side, I didn't know that much of the fees in addition to the origination fee, can and are padded - not to mention the ysp that isn't passed on to me. My broker gave me estimates and my realtor gave me a solid figure.

If I as the consumer, am more focused on the mortgage side than the realtor fees, wouldn't I be stepping over pennies to pick up dollars?

I find it interesting that just about every broker says that they can't be beat. Mine said this too. What mine didn't tell me is that I had to go out and find a better deal for him to lower his. All he told me was that he is the lowest fee/best rate guy around and no one else can beat him.

Dogwood-

For most consumers, the cost of their mortgage boils down to rate and fees. These are highly visible as you have to write a check for them every single month. It is the most visible expense of any household. To the typical consumer, 6.25% is better than 6.5%. End of discussion. Realtor costs on the other hand are not as visible. Yes, you know it is six percent and it is built into the price of the house. However, would you have been willing to pay that six percent if it came directly out of your pocket in one lump sum and not financed in the cost of the home? Probably not. You would be calling around "rate shopping" just like you did on your mortgage. If this was the case, you damn sure would be thinking about going with the 5% Realtor instead of the 6% realtor. This is why you never even thought to ask if the Realtor side was negotiable. There are a ton of Realtors who would have gladly rebated some of their commission back to you if you has asked. Consumers just don't think to ask because the fees are not visible, Realtors tell you "the seller is paying my fee", hide behind buyers agreements and contracts, and Realtors for the most part aren't as quick to cut each others throats as lenders are.

I do agree with you that being upfront is important. Many mortgage brokers are upfront. In fact, federal law requires that any YSP has to be disclosed on brokered loans. However, service release premiums (SRPs) that mortgage bankers get are not disclosed. On the other hand, most consumers still only want what they perceive to be the best rate, not transparency in pricing. Being upfront about pricing does not guarantee the lowest rates. It just guarantees the loan officer/broker's commission.

Mortgage pricing is very fluid and there is no such thing as the "best rate". Mortgage rates change every single day depending on the financial markets. In addition, there are so many little things with loans - ltv, loan size, credit, property type, location, lock period, etc that can have an impact on the rates quoted.

I understand your desire to get the best deal, but since I have been in this business it has baffled me that consumers use price as a deciding factor on the largest and most complex financial transaction of their lives. Not that price isn't important, but it amazes me how people will worry about saving $50 bucks on a $500k purchase. Especially when this purchase involves reams of legal contracts, tens of thousands of dollars can be at risk, emotions running high, and is basically the most complex purchase of most of us will ever make. Of course, the $50 sounds like a lot of money until the escrow blows up because the internet lender you found with the "best deal" doesn't come through.

Nevertheless, you did good by shopping, because it sounds like the guy you were using did have you priced a little high, if it was so easily beat by a substantial amount. I hope everything else goes/went well with your transaction.

www.smartmortgageadvice.com

Russ - I admit that I never thought to ask my realtor to float some of his commision. And I do see your point. That is good to know for future reference. I don't know how significant the rebate would have been but maybe it would have - every bit counts. I still can't help but think that the loan is more significant especially when you plan on being in the home 10+ years. Over the long haul - how much did I actually save myself. $3100 out of pocket and a 1/4% over 10+ years is pretty significant.

So why don't brokers question the fees of the realtor - or at least suggest that the borrower try to negotiate them?

Thanks for your input Russ, it is good info that, your right, most consumers probably don't think about.

Cause the realtor brings more business to the broker in the form of other buyers. If the broker starts negotiating against the realtors interests its goodbye, so long I can find another mortgage broker for my buyers. The buyer generally only has one house and no leverage except as a possible future customer for a refi or a bigger house in 7 years.

Hi everyone,

I am new to this forum, but i would like to say why does it matter if the loan officer is getting a rebate. I think as long as the client get what they want and they are happy then it should not matter. What homeowners need to understand is that they are paying for a service. A loan Officer job is not a easy as it seems. We charge for our service and our time. What clients have to remember is that this is how we make our living. Example: Doctors, lawyers, etc.. Have any one ever been to their doctor and tell them that they charge too much and that they need to reduce their fees. No because thats their job and to be the best doctor they can be and take care of their clients just like loan officers. So for me I will never lower my standards and not charge my clients.If I did that i would not be able to pay my bills, Put food on my table. Who ever wants loan officers to work for nothing why don't you tell your boss you want to work for them for free.

Hi Lscalder,

Welcome to the forum and thanks for responding. I am not disputing the fact that you should get paid. You should. A good honest mortgage broker should be successful just as with any other profession. That is not my issue. The issue is that my broker chose to charge me higher fees and a higher rate even when faced with the opportunity to get me a better rate and better fees. He got greedy plain and simple and I called him on it. I found two better rates and fees on my own that beat his. He told me that nobody can beat him and I trusted that until it was brought to my attention that he really wasn't working in my corner. If you can find me a killer deal, I could care less that you get an upfront fee and a yeild from the lender. But if I can do better on my own, something is wrong here. Lscalder, it really isn't hard to understand that a broker should get paid. I never said that they shouldn't get paid. Just be honest, upfront, and don't get greedy. Let me ask you a question - What is honestly stopping you from looking for the best deal for yourself instead of for me? My answer to that is an informed consumer. There are plenty of you good guys out there that do it right. But just as with any profession, there are bad apples too. I am not bashing you guys as mortgage brokers at all here. Many of your responses seem to indicate that I am doing so. Again, all I ask is a fair deal. If you make good money off of me but do a good job and find me a good deal - I am totally fine with that.

Craig