Working With Your Home Loan Mortgage Broker

Working with a home loan mortgage broker can save you time and money because they can be an excellent source of information. A broker will have costs associated with their services. The following information can help you get the most out of working with a home loan mortgage broker.

Know Your Credit Score and History

The interest rate on your mortgage depends, in large part, on your credit score. Home loan mortgage brokers must be competitive and make their money by closing a loan for you, but that doesn't mean they automatically will find you the best rate. It is always a good idea to shop around for good rates and fees and bring those things back to the negotiation table for your broker.

You are entitled to a free credit report every year from the three main credit reporting bureaus, Equifax, Experian and TransUnion. Typically, a score of 659 is low and you will pay higher rates than with a score of 720, which is considered excellent. Additionally, your report list negative information, such as late payments or loan defaults. If they are listed erroneously, you should work to correct them.  Your broker can be a great resource to assist you with the corrections you may need because they can give you pointers and help you with creditor letters.

Know What You Can Afford

A rule of thumb is that your total monthly house payment, including insurance and taxes, should be 28 percent of your gross monthly income. Go to your broker for a prequalification so that you do not waste your time, or your broker's time, putting offers on homes you can not afford to buy. Sometimes, the monthly payment is not comfortable, so be certain to express your comfort level.

Know What Fees You Pay

Home loan mortgage brokers are paid for their services in two ways. They charge fees for originating the loan, and they collect a rebate, what is known as yield spread premium. The yield spread premium is the amount an investor will offer a broker for the rates offered.  The theory is: if you pay YSP in the loan, the broker will waive many other fees associated with closing the loan. It helps the first-time home buyer who might not have cash for fees.

If a mortgage broker is charging both origination and YSP, they must disclose all fees and the YSP on the good faith estimate.  The good faith estimate is a form that should be provided to you within three days of your application. A mortgage broker provides a service, and should be paid, but be sure to compare the fees with different companies so that you are not paying more than you should.

You Can Still Shop Around

You are not obligated to use a home loan mortgage broker, even if he has done preliminary work for you. If a bank or another broker offers a better deal, you are free to take it. Be sure to shop both rates and fees to establish a broad idea of programs and costs.

Know Your Broker

Mortgage brokering is a part of the lending industry that has been subject to abuses. Stick to referrals or check references.  A broker can be an invaluable source of information.  Be sure they are knowledgeable and interested in your needs.