If you are considering refinancing with a broker, there are pros and cons to using a mortgage broker. Mortgage brokers have access to wholesale mortgage loans which means you will qualify for more competitive interest rates and fees. Another reason to use a mortgage broker is that they are much more likely to negotiate for mortgage rates and fees than other types of mortgage companies. Here are several tips to help you decide if you should use a mortgage broker for your loan.
Be Careful If You Use a Mortgage Broker
Mortgage brokers routinely markup up your mortgage rate to receive a bonus from the wholesale lender they represent. You qualify for a specific rate from the wholesale lender; however, the mortgage broker marks it up because the lender pays them one point for every .25% they inflate your interest rate. Ask your mortgage broker to see the original interest rate guarantee from the wholesale lender and tell them you will not pay retail markup of your mortgage interest rate.
Don’t Overpay If You Use a Mortgage Broker
Your mortgage broker is compensated for their services by the origination fee you pay. This fee should not be more than 1.5% of your loan amount; however, you may be able to negotiate the origination fee down to 1%. Anything greater than 1.5% for a home you will be living in is considered to be excessive and you should find another broker with reasonable fees.
Pay close attention to the Good Faith Estimate and HUD-1 statement to make sure there have been no glaring changes before closing. You can learn more about your options when using a mortgage broker by registering for our free mortgage tutorial.