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09 Mar

As a Home Buyer, Do I Pay the Mortgage Broker?

Posted March 9th, 2008 | View Comments

As a home buyer, yes, you would pay the mortgage broker for his or her services in finding you the right and hopefully most inexpensive mortgage. You would also pay him for explaining which mortgage best suits your needs at the current time. Usually, the way it works is this: the real estate brokers get paid by the seller at closing and the mortgage broker gets paid by the buyer. (There is obviously some confusion in the above regard related to real estate brokers, because even though the buyer’s broker is paid by the seller through a broker co-operation, the buyer’s broker is not an agent of the seller. Just wanted to clarify that.)

The mortgage broker will typically charge points if you want to buy down the interest rate of your mortgage. Usually 1 point corresponds to 1/8 of a percentage drop in your mortgage rate. Other fees involved are processing fees (sometimes points are included here, so read your HUD-1 carefully), transaction fees, credit reporting fees, appraisal fee, underwriting fee and so on.

The total of these fees usually adds up to between 1% – 3% of the purchase price of the house. This is why when we ask for closing costs back from the seller, they are usually capped at 3% of the purchase price. The negative aspect of getting closing costs back from the seller though is that they get added on to your loan, so you’re paying for them essentially for 30 years. It is much better to pay closing costs out of pocket if you can. It even makes for a stronger offer.

  • http://realtydigest.blogspot.com riathareja

    There is your first reason. If you have less than perfect credit and have found it difficult to get approved by a traditional bank or credit union, a mortgage broker can present you with more loan options and there is likely one or more options to fit your credit profile. If you have okay credit, the truth is that you may have a higher interest rate than borrowers with great credit, but if you are really set on buying a house, you will be willing to pay a higher interest rate. First, do what is called shopping for the best interest rate. One mortgage broker can offer a variety of interest rates and loan terms from which to choose.They found that “a broker may reduce borrowers’ search costs and enable borrowers to obtain lower cost credit than they could find themselves.” This is an important consideration. If you are going to multiple lenders, you will have to pay multiple fees. Don’t be misled by a lender’s offer for a free mortgage pre-approval. To actually process a complete mortgage application, most lenders require a fee ranging from $150 to over $400. After you have paid the fee, the outcome could still be that you are rejected for the loan. Some lenders will refund the fee if you do not qualify. Some brokers will only charge a fee if they are able to successfully write a loan for you. You have to get the details from each firm, lender or broker, to find out what they really charge.
    The broker maintains relationships with an array of lenders and may create loans for a reduced cost using economy of scale and specializing in certain types of loans. The lower cost is when compared with a lender writing loans in a branch office.Your decision to use a mortgage broker is important. Compare the services of your mortgage broker with the services of traditional banks, credit unions, and lenders before choosing the service that is right for you. You can also research the reputation of mortgage brokers in your area or get referred by a friend or relative who was happy with a particular broker. Just like every profession, there are good and bad brokers. If you find the right one, it can be a mutually beneficial relationship.

  • http://www.sacramento-home.com/real-estate-agents/ John Lockwood

    Riatharega,

    Thanks for coming in. Very well considered post, I appreciate it.

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