| By :
Adrianna Noton
For those buying or refinancing a house or other property, mortgage brokers have become increasingly popular. They are now used by 60 percent or more of borrowers. Banks and other direct lenders only approve or reject an application, after which you must start the whole process over again at another lender. Brokers, on the other hand, take your application and financial information only once, and submit it for you to a wide network of lending entities. It can be overwhelming to try to understand the complexities of the real estate and financial markets on your own, and banks are motivated primarily by their own interests. Brokers advocate for their clients, having no obligation to any one lender. Brokers are also more flexible than direct lenders in terms of adjusting rates to suit your needs. They understand how the market works and keep up to date on interest rates, which can change daily. After finding out what you are looking for, and reviewing your financial information, they are able to explain the different types of loans and make recommendations. Their access to banks, trust companies, credit unions, finance companies and local lenders enables them to find the terms that work best for your unique situation. For the work they do for you, submitting applications on your behalf, advocating and offering advice along the way, brokers deserve to be paid. Their payment is taken in the form of fees which are paid by you and, sometimes, as Yield Spread Premiums (YSPs) which are commissions provided to the broker by lenders. YSPs are required to be disclosed to the borrower, who benefits by lower upfront costs, though monthly payments will be higher. There is no such thing as a no-fee mortgage; this term just means that administrative costs are combined into your loan amount, rather than being separated out as fees. Points are another type of fee taken by the brokerage, one point being equivalent to one percent of the full value of the mortgage. Points have the effect of lowering the interest rate for the borrower. They are a good value for those planning to stay in a property for longer than three years. Fees are regulated by federal law and, in 49 states, by state law as well. These laws govern the disclosures and warnings that are provided to consumers, and conditions of compliance for brokerage firms. Ask about the purpose of fees and how they are calculated. Obtain estimates from several different brokerages so you can see what is competitive. The Department of Housing and Urban Development (HUD) has a form, called the Good Faith Estimate, which allows the direct comparison of each element of the quote. This form is required by law to be provided to you in as little as three days after your application is received. The estimate may or may not be guaranteed by the broker. Mortgage brokers save you time and money with their comprehensive knowledge of the real estate and financial markets. They provide personalized service and targeted advice. Their ability to evaluate a variety of lenders in light of your specific needs will help you find the loan that is right for you.
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