On my drive home today, I was thinking about a recent encounter I had with a mortgage broker. I decided that I had some info worth sharing that someone may benefit from: getting a mortgage.
I believe this info will sustain the test of time and if I ever get another mortgage, I'll use this info. I'll also say, I'm not looking to be in the mortgage business and I obtained this info because I interviewed a mortgage broker to write a direct mail sales letter for him. This was the info he gave me during the interview to write his sales letter.
Here's the rules to get the best mortgage possible:
1. Know your credit - the better your credit, the better the interest rate. That's a no-brainer but it will always be valid.
2. Do not pay unnecessary fees such as the following
a. Broker fees
b. Application fees
c. Origination fees
d. Points - points are nothing more than up-front interest charges.... if your credit is good, you can actually have negative points and save some money. To me, that's the only time they are good.
e. Any fee really. You should only have to pay for the amount borrowed plus the other costs mandated by law.
3. Shop around for the best rate - get at least 3 quotes
4. ALWAYS USE A MORTGAGE BROKER - let me explain this a little. Mortgage brokers must follow consumer protection guidelines. Banks and Lenders are EXEMPT from those guidelines..... those guidelines are called the "Broker protection clause." Whoa! Another fact: Mortgage brokers get wholesale rates from many companies don't typically push just one single product. Banks and Lenders only have their product line so they are more limited in their offerings.
5. Ask the mortgage broker what their commission is. Why? Mortgage brokers must choose their commission up-front. They get to choose a % more than 2% and less than 3%. They are not required to tell you what their commission is, however, the less they have in commission means the more they are capable of "giving you back money towards your closing." Weird how that works but if they choose 2%, they can actually give you back the remaining 1%. At least that's the way it was explained to me. If they don't tell you, move on to another broker who will.
6. Negotiate your rate. Yep, rates are NEGOTIABLE. Woohoo!
7. Ignore "limited time offers" - there is no such thing. Mortgages are always available, this is only a marketing scam.
8. If you're refinancing, ALL brokers can do a "no money down" refi.
9. Watch out for the brokers that advertise adjustable rates as if they were fixed rate mortgages. They are scamming you. Know what the going mortgage rate is: fixed or adjustable. The rates change as many as 4 time per day. Ugh.
10. You can lock in at a lower rate and get that lowered. Once you've locked in a rate, they can't raise your rate.
Funny little fact - Most quote higher rates first and only if you tell them you're going somewhere else will they give you the best possible rate.
Understand Lender Credit:
Lender credit is the borrower agreeing to take a slightly higher mortgage rate in exchange for lower closing costs. Simple enough concept.
Now Closing Costs.
Here's another fact: the average person does not keep a mortgage for 30 years.
They end up refinancing every 5+ years or so to either lower the term or pull money out or they end up selling their home and moving.
When you take into account time value of money and inflation, $5k today is more valuable than $15k over the next 30 years. As a rule: if you have plenty of money in the bank and the upfront cost of a mortgage does not deplete your account than pay upfront closing costs. Paying up-front will always cost you less because you don't pay interest on the costs you avoided.
Bottom line is a broker can provide options and is forced to follow rules banks and lenders are exempt from. Most bank and lenders only give you one option most of the time.
Knowledge is power: use this power to save yourself a bunch of money.
I hope this helps.
I believe this info will sustain the test of time and if I ever get another mortgage, I'll use this info. I'll also say, I'm not looking to be in the mortgage business and I obtained this info because I interviewed a mortgage broker to write a direct mail sales letter for him. This was the info he gave me during the interview to write his sales letter.
Here's the rules to get the best mortgage possible:
1. Know your credit - the better your credit, the better the interest rate. That's a no-brainer but it will always be valid.
2. Do not pay unnecessary fees such as the following
a. Broker fees
b. Application fees
c. Origination fees
d. Points - points are nothing more than up-front interest charges.... if your credit is good, you can actually have negative points and save some money. To me, that's the only time they are good.
e. Any fee really. You should only have to pay for the amount borrowed plus the other costs mandated by law.
3. Shop around for the best rate - get at least 3 quotes
4. ALWAYS USE A MORTGAGE BROKER - let me explain this a little. Mortgage brokers must follow consumer protection guidelines. Banks and Lenders are EXEMPT from those guidelines..... those guidelines are called the "Broker protection clause." Whoa! Another fact: Mortgage brokers get wholesale rates from many companies don't typically push just one single product. Banks and Lenders only have their product line so they are more limited in their offerings.
5. Ask the mortgage broker what their commission is. Why? Mortgage brokers must choose their commission up-front. They get to choose a % more than 2% and less than 3%. They are not required to tell you what their commission is, however, the less they have in commission means the more they are capable of "giving you back money towards your closing." Weird how that works but if they choose 2%, they can actually give you back the remaining 1%. At least that's the way it was explained to me. If they don't tell you, move on to another broker who will.
6. Negotiate your rate. Yep, rates are NEGOTIABLE. Woohoo!
7. Ignore "limited time offers" - there is no such thing. Mortgages are always available, this is only a marketing scam.
8. If you're refinancing, ALL brokers can do a "no money down" refi.
9. Watch out for the brokers that advertise adjustable rates as if they were fixed rate mortgages. They are scamming you. Know what the going mortgage rate is: fixed or adjustable. The rates change as many as 4 time per day. Ugh.
10. You can lock in at a lower rate and get that lowered. Once you've locked in a rate, they can't raise your rate.
Funny little fact - Most quote higher rates first and only if you tell them you're going somewhere else will they give you the best possible rate.
Understand Lender Credit:
Lender credit is the borrower agreeing to take a slightly higher mortgage rate in exchange for lower closing costs. Simple enough concept.
Now Closing Costs.
Here's another fact: the average person does not keep a mortgage for 30 years.
They end up refinancing every 5+ years or so to either lower the term or pull money out or they end up selling their home and moving.
When you take into account time value of money and inflation, $5k today is more valuable than $15k over the next 30 years. As a rule: if you have plenty of money in the bank and the upfront cost of a mortgage does not deplete your account than pay upfront closing costs. Paying up-front will always cost you less because you don't pay interest on the costs you avoided.
Bottom line is a broker can provide options and is forced to follow rules banks and lenders are exempt from. Most bank and lenders only give you one option most of the time.
Knowledge is power: use this power to save yourself a bunch of money.
I hope this helps.
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