Should You Use Your Agent's Mortgage Broker?
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Your real estate agent should provide you with a lot of great advice. They’re well versed in real estate law, the housing market, and hopefully know exactly what you’re looking for in a home. You rely on your agent to provide you with information and advice, so when they give you a recommendation for a mortgage broker you should jump on it.
Right?
It depends.
Is your agent’s recommendation the best option? Are they acting in your best interest? Or are they pushing their broker on you for another (nefarious) reason?
Here’s everything you need to know about whether or not to use your agent’s recommended broker.
Does your agent get a kickback?
The quick answer to this is, no, your agent does not get a kickback from making a recommendation for a mortgage broker. In fact, paying an agent for a recommendation in many cases is illegal. The Real Estate Settlement Procedures Act (RESPA) was passed in 1974 and makes it against the law for a real estate agent to receive compensation from a mortgage broker for making a recommendation if the mortgage is being underwritten by a federal organization or may be sold to Fannie Mae or Freddie Mac.
A broker can’t even so much as buy your agent a burger without breaking the law.
That’s not to say that it doesn’t happen though. There’s a good chance your agent and their recommended broker have some sort of relationship.
They may even be friends
But that’s not a bad thing! Their relationship can translate to positive things for you and the buying process. Your agent presumably has knowledge of the broker’s history, success rate and his or her work ethic. In a perfect world they make the recommendation because they have a previous relationship and faith in that particular broker.
Why do people work with recommended brokers?
Many home buyers will use their agent’s recommendation when looking for a broker because it’s fast, it’s easy, and it’s one less thing to worry about.
Another reason is that the broker is likely local and can meet you in person. They are there to sit with you and answer your questions. If you are confused by anything regarding the mortgage process, you can pick up the phone and call.
Juxtapose that with using an online mortgage broker. You’ll have to fill out all the forms by yourself and there’s no one in the room to answer your questions. You could call the customer service number, but it’s not the same as in-person service.
The BIG issue, however, with one stop shopping is that you deprive yourself of choice.
Should you shop for a mortgage broker online?
It depends.
One of the main benefits of shopping for a mortgage online is that in order for them to be competitive is that they are typically cheaper than a local mortgage broker. Because online mortgage brokers deal in higher volume they can usually offer you a mortgage with a lower interest rate and lower fees. This is in contrast to local brokers. A local mortgage broker has expenses and profit margin requirements that typically make them more expensive than getting a mortgage online.
Online Brokers are also typically a little faster than traditional brokers. Because of automation, you can apply for a mortgage while you’re sitting on your couch watching TV. You don’t have to make an appointment, and can do it at 2 AM if you want.
You just have to be careful. When you are filling out your application online, it’s important to make sure that all of the information is 100% accurate. One of the main reasons online mortgage applications fall through is that borrowers give faulty or incorrect information. Don’t guess and don’t fudge. Whether you’re applying for a mortgage locally or online, all the information has to be completely accurate.
This is one reason why you may want to work with a local broker. A local broker will work with you and help you correct mistakes, which is the opposite of doing it online. Instead of getting a cold, automated no, you get a, “Hey, we need to look at this real quick.” For many people, that alone is worth the added expenses.
Which one should you choose?
There is no simple answer. It really just depends on how you prefer to do business.
If your agent makes a recommendation, try to get a second or a third opinion. Don’t just go with one option because it’s easy. Instead, shop around. Also, just because you meet with a broker doesn’t mean you have to sign with him or her. Set up an initial meeting and ask lots of questions. If you don’t like the answers, or you find someone better, move on. You’re not looking for a lifelong friend.
With online brokers, you don’t have the advantage of meeting them in person but you can read reviews. Take advantage of this.
The most important thing to remember when looking for a mortgage broker is that you have options. You are the one in control and you make the decisions. You don’t have to go with someone just because they’re recommended. You can (and should) shop around.
Note: Photo courtesy of Huub Zeeman via Flickr: https://www.flickr.com/photos/huubzeeman/