What Should I Be Asking My Mortgage Broker?

There has been a big upsurge in refinancing of late, so a lot of people are contacting new mortgage brokers to determine how they can get the best rates.  I recommend calling at least 4 or 5 new brokers to give you a good basis of comparison.  Even if you have a current broker relationship, it is important to ask the right questions when you begin the process.  Here are the right questions you should be asking your mortgage broker:

1.How many refinances did you close in the last year? I’m not looking for exact statistics, and I wouldn’t disqualify anyone unless the number seemed very low. I just wanted to get a feel for how busy the person is and what he or she is juggling.

2. What is the turn around time like now? Refinances can take months right now. One mortgage broker said that some mortgage companies that laid off workers
haven’t rehired people to accommodate the current refinancing boom. There is also a big change in the way that appraisals are being done; inflated appraisals soon should be a thing of the past. This is creating uncertainty in turn-around times at the moment.

3. Here is my basic situation. What type of mortgage do you think is appropriate? Be prepared to give an estimate of your credit scores without
actually looking at your credit scores. These days there can be different rates for people with credit scores up to 750 (850 is the highest score available.) You don’t want to lower your score by checking it right before you apply for a mortgage.

Also, know what your loan balance is and what you think the house is worth. If you don’t know, check Zillow.com or Trulia.com for some insight. Tell the broker how you arrived at the number. One broker said that Trulia plus 5% is what his appraiser typically came in at. This was before the new appraisal process, so it might or might not be correct in the future.

You might get a larger variety of responses that you expect to this question. When I called brokers, I got two dramatically different, and probably equally valid, approaches to my situation.

4. What are your fees? Fees come in many flavors. There are the bank fees, appraisal fees, title fees, and “interest rate credits.” The mortgage broker may tell you they don’t have control over the title fees. Most don’t. However, I spoke with one broker whose company had its own title company; she would have a good idea of the title fees. No mortgage brokers are going to pay for the amounts that end up in escrow for your interest, property tax, or insurance. Those might feel like fees you, but mortgage brokers don’t consider them fees.

You may end up going with a no closing cost mortgage. That just means that the fees are rolled into the mortgage rate. The fees are still there.

5. Will you guarantee the Good Faith Estimate? The broker is required to provide a Good Faith Estimate of your closing costs during the refinancing process. You don’t want new fees to come up a week before the closing. I liked the brokers who said “absolutely” or “The fees I’m quoting you now you can take to the bank. Period.” I didn’t like the broker who tried to get me to look up the definition of “estimate.”

6. What is the process like, particularly at the beginning? When do I have to pay the fees? I wanted to know if I had to pay upfront or if I had to pay
the fees at the closing. Refinancing deals come to a screeching halt for many reasons. For instance, your appraisal comes in lower than you expect, making you
reconsider the deal. If you can find a broker who doesn’t charge for the appraisal upfront, it’s a mark in that broker’s favor.

What question is not on the list? “What are your rates?” Sure, you probably will ask. However, without a full credit report and completed application, it’s tough for the brokers to give you accurate information. Expect them all to say they have the best rates.

About the author

Bridget Sullivan Mermel, CFP®, CPA
Bridget Sullivan Mermel, CFP®, CPA

Hi. My name is Bridget Sullivan Mermel. I started a fee-only financial planning firm, Sullivan Mermel, Inc. We especially enjoy working with attorneys, small business owners, near retirees, and clients interested in socially responsible investing.

We practice in a small niche of the industry called fee-only, which focuses on giving un-biased advice. We don't take commission, get kick-backs, or sell products. We have no hidden agendas. Our focus is on giving our clients the best comprehensive advice possible.

I started out with a tax practice in 1997. I could see that clients wanted and needed help not just with their taxes, but with other areas of their personal finances, too. When I found out about fee-only advising, with its emphasis on giving bias-free advice, I was hooked! I love helping people understand and improve their fiances.

I worked as manager and district manager during the start-up phase of Starbucks. I also worked supporting high profile litigation and in the back office of a derivatives firm.

I have a BA in Accounting and Marketing from the University of Wisconsin, Madison and a Masters in Liberal Arts from DePaul University in Chicago. I am a Certified Financial Planner™ as well as a Certified Public Accountant.

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