Lend­ing help

Baltimore Sun Sunday - - REAL ESTATE - By Ellen Chang

Hir­ing a mort­gage bro­ker can help re­lieve some of the stress and an­swer loan-re­lated ques­tions when you’re buy­ing a house, es­pe­cially if you’re a first-time home­buyer.

In their role as the mid­dle­man be­tween bor­row­ers and lenders, a mort­gage bro­ker can help you find a lender that meets your needs and fi­nan­cial re­quire­ments, such as a pref­er­ence for a lower down pay­ment or the best in­ter­est rate pos­si­ble. If you’re seek­ing a Fed­eral Hous­ing Ad­min­is­tra­tion or Vet­er­ans Af­fairs loan, for ex­am­ple, a bro­ker with ex­pe­ri­ence in work­ing with vet­er­ans, or who un­der­stands the re­quire­ments for FHA loans, can sim­plify the process.

“Some (lenders) may spe­cial­ize in par­tic­u­lar prop­erty types that oth­ers avoid. Some may have more flex­i­bil­ity with credit scores or down pay­ment amounts than oth­ers,” says David Reiss, a law pro­fes­sor who spe­cial­izes in real es­tate and con­sumer fi­nan­cial ser­vices at Brook­lyn Law School in New York and the editor of REFinBlog.com.

Work­ing with a mort­gage bro­ker has ad­van­tages over go­ing di­rectly to a lender to ob­tain a mort­gage. Con­sumers can save money dur­ing the process, ob­tain more loan op­tions and have some­one ex­plain the fine print to them, which can save time.

The mort­gage in­dus­try is chang­ing con­stantly, and a good mort­gage bro­ker can help a home­owner un­der­stand the lengthy process — from get­ting a good in­ter­est rate to pay­ing lower fees to clos­ing the loan on time.

A mort­gage bro­ker’s role

A mort­gage bro­ker works for a lender known as a non-de­pos­i­tory in­sti­tu­tion, says Rick Mas­nyk, a branch man­ager at Net­work Fund­ing in North Smith­field, Rhode Is­land.

“They pro­vide home fi­nanc­ing with­out hav­ing ac­cess to the other prod­ucts that a de­pos­i­tory in­sti­tu­tion or a bank pro­vides,” Mas­nyk says.

Un­like a bank loan of­fi­cer who can only of­fer mort­gage prod­ucts avail­able at his own bank, mort­gage bro­kers have an ad­van­tage be­cause they have ac­cess to sources of fi­nanc­ing from mul­ti­ple fi­nan­cial in­sti­tu­tions, such as JPMor­gan Chase and Wells Fargo, as well as other ones that a con­sumer may not have heard of be­cause they don’t have bricks-and­mor­tar lo­ca­tions within that con­sumer’s geo­graphic area, Mas­nyk says.

Fed­eral laws re­quire that mort­gage bro­kers are li­censed and can­not have their salary linked to the in­ter­est rate you re­ceive from a po­ten­tial lender. Work­ing with a bro­ker should not af­fect how much your loan will be.

A bro­ker can save the con­sumer time and effort in “lo­cat­ing the best pos­si­ble loan,” says Jackie Boies, a se­nior direc­tor of hous­ing and bank­ruptcy ser­vices for Money Man­age­ment In­ter­na­tional, a Sugar Land, Texas-based non­profit debt coun­sel­ing or­ga­ni­za­tion.

Part of a mort­gage bro­ker’s job is to “do the math” and let a bor­rower know the loan amount they qual­ify for to be ap­proved for in a mort­gage, Mas­nyk says.

“They would be re­spon­si­ble for orig­i­nat­ing the loan and plac­ing the loan with the in­vestor who would fund the trans­ac­tion at the clos­ing ta­ble,” says LeeAnn Casanova, U.S. sales direc­tor of whole­sale mort­gage prod­ucts for Quon­tic. “It is about find­ing the right mort­gage for each unique buyer.”

How does a mort­gage bro­ker get paid?

A mort­gage bro­ker’s fees are more trans­par­ent in the af­ter­math of the Great Re­ces­sion in 2008.

The cost of the loan is charged to the bor­rower and the lender pur­chas­ing the loan pro­vides a credit equal to that cost, re­sult­ing in no cost to the bor­rower, Mas­nyk says.

Mort­gage bro­kers get paid in ei­ther one of two main ways: up­front at clos­ing by the bor­rower, or af­ter the trans­ac­tion closes by the lender. The bro­ker’s fee is a small per­cent­age of the loan amount, usu­ally be­tween 1% and 2%.

Work­ing with a bro­ker

Home­own­ers who choose to work with a mort­gage bro­ker can re­ceive more in-per­son in­ter­ac­tion and let a li­censed pro­fes­sional do the leg­work for them, Mas­nyk says.

“Work­ing with some­one you can see face to face and/or some­one your Re­al­tor

has used in the past and trusts is al­ways a great source,” he says. “There’s no rea­son not to.”

In ad­di­tion to con­sult­ing a mort­gage bro­ker, shop around at sev­eral mort­gage lenders to ob­tain the best in­ter­est rate and term of loan that fits their sit­u­a­tion. Whether the con­sumer chooses to use a mort­gage bro­ker or banker is a per­sonal choice.

“It’s just as im­por­tant to shop for the low­est pos­si­ble clos­ing costs in con­junc­tion with that rate,” Mas­nyk says. “A mort­gage provider may ap­pear to have a great rate, but if their clos­ing fees are ex­ces­sive, you may not be get­ting the deal you think you are. What you pay over­all in monthly pay­ments and clos­ing fees de­ter­mines the best pos­si­ble mort­gage pro­gram.”

Many bro­kers have ac­cess to a pow­er­ful loan pric­ing sys­tem that helps price your loan across many lenders at one time.

“They can quickly fo­cus in on the best lenders for your sce­nario,” An­drew Weinberg, a prin­ci­pal at Sil­ver Fin Cap­i­tal Group, a Great Neck, New York, mort­gage com­pany, says. “In most cases, they do not charge the client a penny for their ser­vices. Their com­pen­sa­tion comes solely from the whole­sale lender, and only in the event the loan closes.”

Bro­kers main­tain a large net­work of whole­sale lenders and can pro­vide con­sumers mul­ti­ple of­fers, rather than be­ing lim­ited to the of­fer­ings of just one lender.

Choos­ing one

Find­ing a mort­gage bro­ker re­quires a bit of home­work: ask for re­fer­rals from your Re­al­tor, friends and fam­ily.

Check their li­cens­ing with your state pro­fes­sional li­cens­ing au­thor­ity, read on­line re­views and check them out with the Bet­ter Business Bureau, Boies says.

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