Thanks to the housing crisis, mortgage brokers have developed a seriously bad reputation. Because their pay is traditionally 100% commission, brokers before the crisis were known to engage in nefarious activities, tying up clients in potentially damaging loans for a quick buck. It was so bad that some banks have stopped working with brokers entirely.

Merry HDR Christmas
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Thanks to this crackdown, brokers operate more carefully now, but that doesn’t change the nature of the broker/borrower relationship. Just as in dealing with any salesperson, there are some basic things that any borrower has to be aware of when they deal with a mortgage broker.

Brokers are people looking to make money. That is their priority in life and at work. This can work in your favor or against you.

Getting a Reputable Broker

The best way to get a broker who is more concerned about his reputation than short term profits is through referrals from friends, family, or the internet. You should always Google a broker to see what people say about him or her before hiring them.

Don’t work with anyone who is questionable.

Enforcing your Priorities

A broker will not be opposed to getting you the best deal, but they will still be tempted to maximize their own profits at your expense, so make sure that they know you won’t play along with that.

Banks used to reward brokers for getting clients to sign up for certain bad loans, most of which no longer exist. You should still ask your broker if their yield-spread premium, that is the money they are getting from the deal, would be lower if you made a different choice. If they give an answer that you don’t understand, as someone who can explain it to you, like an accountant.

Talk to multiple brokers. This might seem a little unethical, but it isn’t. It’s your money and you have every right to ask multiple people for their input.

The Benefits of Brokers

This might put you off of mortgage brokering altogether, but let me assure you that there is a good reason they still exist.

A broker knows far more about home finance than a run of the mill bank officer. A motivated broker can find competitive rates that are simply not available to regular people. That’s on top of the regular benefit of saving you the headache of the extensive legwork it would take to do the paperwork shopping around for the best deals.

Jim Haney is a finance writer dedicated to ensuring that the public enters any and all housing and investment decisions wisely. On the weekends, he and his four-legged friend Lightnin’ Bug, a border collie, compete in agility competitions.

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