Is a mortgage broker worth it?

[fortnightlily]

Hey all,

The real estate board is kind of dead, so I'm asking here.  DH and I are totally new to the home-buying process.  I've done some reading, but it's still not clear to me what the right route is for getting pre-approved.  I don't really want to go with one of the big banks like BoA or Wells Fargo.  

You have to pay a mortgage broker, yes?  Is it worth it or should I just try to find lenders myself, contact smaller banks, etc?

Thanks!

[Susie]

Jan 25, 2013 10:16:45 GMT -5 fortnightlily said:

Hey all,

The real estate board is kind of dead, so I'm asking here.  DH and I are totally new to the home-buying process.  I've done some reading, but it's still not clear to me what the right route is for getting pre-approved.  I don't really want to go with one of the big banks like BoA or Wells Fargo.  

You have to pay a mortgage broker, yes?  Is it worth it or should I just try to find lenders myself, contact smaller banks, etc?

Thanks!

No, not in my experience.  We used a mortgage broker for our purchase and our refi.

Our broker worked with whichever bank had the best rate for us at the time, which turned out to be HSBC for the purchase and BOA for the refi.  So if you are firmly against using one of the larger banks, you should probably go instead to a small local bank.  Make sure it's one that keeps all mortgages in house, rather than potentially selling the mortgage later to a larger bank like some do.

There are reasons - mostly related to customer service - to do that.  Just make sure you're not paying more than you have to in interest for the privilege.

You can also contact both a broker and some local banks and compare, when the time comes to commit, what each of them can offer.

[fortnightlily]

Oh ok. Things to think about...

Thanks

[awick14]

No you don't pay a broker.

I think it is worth it. He was way more helpful then any bank we went to.

[chessie]

Jan 25, 2013 10:32:05 GMT -5 awick14 said:

No you don't pay a broker.

I think it is worth it. He was way more helpful then any bank we went to.

Pretty much how I felt.  We used a broker both times. 

[Deleted]

Ditto Kooshball...they don't work for free! It has gotten more competitive in terms of how much they get, but when I was working for a large bank, it was all rolled into the fees/rate so the client never knew how much they were getting paid.

[fortnightlily]

Jan 25, 2013 10:39:14 GMT -5 RockNVoll said:

 In fact, it's not really until after you find the house you want that you need to seriously go rate shopping.  It could be months between the time you're pre-approved and when you're actually ready to buy and rates will likely have moved around by then.

Yes... but, I live in the DC Metro area, where houses go extremely fast.  I suspect we'll have to renew the pre-approval many times over before we find the right house, but when we do find a house we want to make an offer on we'll have to be able to move quickly.

[Susie]

Jan 25, 2013 10:47:08 GMT -5 fortnightlily said:

Jan 25, 2013 10:39:14 GMT -5 RockNVoll said:

 In fact, it's not really until after you find the house you want that you need to seriously go rate shopping.  It could be months between the time you're pre-approved and when you're actually ready to buy and rates will likely have moved around by then.

Yes... but, I live in the DC Metro area, where houses go extremely fast.  I suspect we'll have to renew the pre-approval many times over before we find the right house, but when we do find a house we want to make an offer on we'll have to be able to move quickly.

We were buying in a hot market too.  We actually got a new preapproval letter for every house we offered on (there were 6 I think?) because we had the broker put the address on the letter rather than an amount we were pre-approved for.  i.e., Calvin & Susie Derkins are preapproved to buy the property at [address], listed at $X.

When $X was at the top of our price range, we didn't want them to think we were strapped/borderline on being able to secure financing to close.

When $X was well below our max price, we didn't want them to think they didn't have to negotiate with us.

Getting a new letter faxed to us each time wasn't really a big deal or much of a delay.  Sometimes we asked for it in advance of seeing the house if we thought it looked really good online.

[goaskalice]

Jan 25, 2013 10:47:08 GMT -5 fortnightlily said:

Yes... but, I live in the DC Metro area, where houses go extremely fast.  I suspect we'll have to renew the pre-approval many times over before we find the right house, but when we do find a house we want to make an offer on we'll have to be able to move quickly.

If you want someone to move quickly when you need a pre-approval a broker who is available weekends is much more likely to be your style. If you work with a bank or credit union be prepared to wait for Monday if you find a house over the weekend. Some banks/credit unions are getting better but that has consistently been my experience. Plus, you realize any bank lender you use would be getting paid too?

As a buyer you don't really pay lender or real estate agent fees directly, they are all part of the transaction as a whole.

[goaskalice]

Generally, you should talk to 3 or more lenders and brokers. There is never a problem with having too much information!

[LoveTrains]

Jan 25, 2013 10:56:10 GMT -5 RockNVoll said:

Jan 25, 2013 10:47:08 GMT -5 fortnightlily said:

Yes... but, I live in the DC Metro area, where houses go extremely fast.  I suspect we'll have to renew the pre-approval many times over before we find the right house, but when we do find a house we want to make an offer on we'll have to be able to move quickly.

But it still shouldn't matter who you get the pre-approval with.  Pre-approval just tells a seller that yes, a bank is willing to give you a loan for X amount and proves that you are able to get financing.  Once you make an offer on the house, even after it's accepted there is still some period of time before closing during which you shop around for the best loan rate.

Exactly. You generally have 30 daysish to close after you put the offer in, during which time you shop around for the best rate and actually secure your financing. 

[fortnightlily]

Thanks everyone!

I knew there were financing contingencies and what not, but I guess I always figured those were more to do with the appraisal matching up with the offer, etc., not that you were actually securing the loan. On the other hand, it makes sense that you would need the property first.

[goaskalice]

Jan 25, 2013 11:06:01 GMT -5 fortnightlily said:

Thanks everyone!

I knew there were financing contingencies and what not, but I guess I always figured those were more to do with the appraisal matching up with the offer, etc., not that you were actually securing the loan. On the other hand, it makes sense that you would need the property first.

The 30 days it takes to close your lender is pretty busy. It takes a while for the appraisal to be ordered and done, they have to send the file through underwriting, and then coordinate with closing company to get you documents to sign. You'll definitely want a lender you trust lined up closer to writing the offer than tying to scramble around finding someone while your also trying to coordinate inspections and such. 

[aurora]

Jan 25, 2013 10:36:09 GMT -5 kooshball said:

You pay for a mortgage broker however the fees are wrapped up in your closing costs so you might not notice. That being said, its worth it. The feel is usually around 1%.

I should also say sometimes the bank will pay the broker fee especially for refis.

This is actually not always the case.  We did not pay CCs (other than pre-paids for insurance and taxes, but that doesn't count since it's just setting up escrow) for our last refi when we used a mortgage broker, and she was able to get us a better rate than we could get elsewhere.  She was paid by the bank that bought the loan. 


ETA - I didn't actually answer the OP's question.  We found it more than worthwhile to use a broker, but ours is exceedingly helpful and they may not all be quite so much.

[fortnightlily]

Yeah, a relative bought us a book, don't remember which one, not one of those but along the same lines. I've just started flipping through it, but was more curious of people's personal experience with brokers.

[kitty]

We used a broker for our pre-approval stuff. We were also buying in a hot/fast market and needed letters for each property sometimes at nights and over the weekend. For the house that we finally bought, we put in our offer at 9pm on a Friday night and needed a letter.

Once it came time to actually get the mortgage, we ended up with BOA because my employer has a deal with them that gets employees special rates. The broker said that he couldn't get us the same rate and basically gave his blessing to go to BOA. I felt a bit bad because we had been calling him up on his cell phone at all hours for months but not bad enough to not do the MM thing!

[CloudBee]

We utilized a broker. It was so nice to have someone do much of the paperwork for us. I wouldn't purchase without one.

When we refinanced, however, we worked directly with our lender.