Question about mortgage brokers

jpm121 · Joined: 14 Feb 2006 Posts: 9

Hi all, I have an easy question (at least I think it is...)

I'm getting ready to start looking for a mortgage broker and I'm confused. Are some brokers more "indepenent" than others?

What I mean is, for example, Haplo -- it says in your sig that you are somehow affiliated with Wells Fargo. Does that mean you only hook people up with WF for loans (kind of like an insurance agent), or that they're your preferred lender, or what? Do most brokers offer a bunch of different loans from different sources, or are you sort of locked into a few products from a given lender?

This is my first time through this, and I've done a lot of research and I think I understand some parts of the process pretty well, but this has me stumped and it's been one of those weeks. My girlfriend's sister suggested their mortgage guy, but when we called he had left the company. I got another referral from several people at a client's office, thinking it was an independent broker, but all 4 people all ended up with Bank of America for their lender. If BofA is really that awesome, then so be it, but I really would like to know that I'm getting some choices so I can pick the best possible service.

Thanks!

chow · Posted: Wed Mar 08, 2006 10:47 am Post subject:

Haplo is employed by Wells Fargo. Here's the easy button on this business and many others (I will use insurance agents and Ketchup/Mustard as a good example too)

Brokers can be someone who has many offices and employees who sell products from several different companies. When you see a Insursant agent say's "Independent Agent" that means he sells products for sever companies-or brokers insurance-just as we broker money.

Larger brokers (Mortgage Bankers) fund loans with money that is drawn from their own bank or wholesale line of credit. Then your loan is sold to the investor who had the product and undewriting guidelines that your loan required. (many investors sell the exact same product, it is just a matter of who the loan officer/Insurance agent or broker has a relationship set up with)

Even if you go to Wells Fargo, or some other large lender, who is also an investor you may end up with your loan being sold to another company. It is impossible for any one company to serve every customer due to risk factors, so the company in it's efforts to assist the sales force with better customer service or a wider range of products, will sell products/services from another company as well. 99% of every mortgage or insurance company out there-will "broker" some services to the clients.

Banks, yes those places you have your checking account and savings acoounts at-also broker loans. Most only retain the equity lines of credit. Depending on that type of credit line, they may only keep some of those. If you close a loan with a "mortgage banker" they do not have to disclose the money that they are making on the loan, for reselling the money. If you go to a mortgage broker (pure broker) they have to disclose the money they are making for reselling the money to you. This is the money we make, that can affect your rate. Since we all have different overhead costs, we "buy" the money at different pricing and resell it at different pricing.

(so by making one set of loan officers expose the "profit" of the funds-the generals over at camp de federal have added yet another layer of confusion for the end consumer)

Haplo and I could set down and write you the exact same loan, have two different sets of costs associated with the transaction. We also could end up being able to close the loan in two different time frames, and one of us could potentially ask you for more or less documentation. (Why? Good Question) Haplo (Mortgage Banker/Lender company) is paid differently, his company is structured differently and he has underwriters who work within his company, his company sets his pricing and policy and procedures, and who he can use, of the 3rd party vendors who affect your closing costs.

A "pure" broker will be able to select almost all of the mentioned-on their own. (this can be good or bad, just like Haplo may not offer a service a broker could) Not every "Agent" sells every insurance company's services, so ergo not every Loan Officer can sell every Investor's money. Underwriting is a big factor in what type of service you need.

This is why a few forms and discloures were mandated by "Camp Fed." The two forms that helps a consumer shop for a loan are the (GFE) Good Faith Estimate aka Good Faith Questimate, and (TIL) the Truth in Lending aka Truth and Confusion. It is rumored that if you set down and compare each form side by side that you should be able to tell you who is giving you the best costs on your loan. It never fully describes if these two loans are the same product (but most of us are wise enough to tell you-if you ask) There is a line at the top of the forms that states if the loan is conventional or goverment, fixed or adjustable rate. (sub prime or non conforming is lumped into conventional on these forms)

It all boils down to a few key factors. Who are you comfortable with? Who educates you about what product is good for you and WHY, and who offers the product you need. Please don't call around asking everyone what their rate is. That does you no good until you know-they know what kind of loan you need. Pricing is dependent on loan to value, credit, reserves (your funds that will be in the bank after closing), your capiticy to pay the loan back (debt to income) and several other factors-this include the little things about the house.

Several issues effect rate. That is one reason the TIL and GFE, that has to be issued to you within 3 days of the application, can change. If you find a home that doesn't fit the original standards, or your employment status changes, or you lied/ told the Loan Officer something that was not correct n the original application, you may not end up with the same loan you started out with. There is also no way anyone can give you a bonafide set of closing costs and rate until the loan is in underwriting with some of the key factors verified. Also with some types of loans, you can lock the rates-some loans, you can't.

I'm sure I've left out some things, others may add, but now that I've basically told you that you can compare all of us Loan Officers.... to the many brands of Ketchup or Mustard out there. We have some that run around in the fancy bottles and they are nothing better than Heinz 57 after you take a taste of them. Any Loan officer who's been around awhile- has worked all sides of the BBQ even if they have worked in the same office for 20 years. If everyone you run into is selling the loan to B of A, they must like B of A! (actually I love B of A, they have some really cool programs!)

Servicing after a loan is closed is nothing we can do anything to control. Loans are pooled and sold off, or the servicing is sold. Our loans are sold and traded like stock. (actually they end up as stocks so to speak)

If you pay on time, you shouldn't have any issues. Where people have issues is when they don't understand escrows change, arm loans change rates, and once in a while when they transfer where you're making a payment at- they lose track of a payment. B of A is big, I can't imagine them selling your loan off to "pee dink servicing" :wink:

Have fun meeting people in the world's second oldest profession! :wink:

You can also visit these sites to get a little more educated.

http://www.hud.gov/buying/index.cfm

www.fanniemae.com

www.freddiemac.com

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Chow gave about as good of an answer as you could hope to get :)

I'm an employee of Wells Fargo Home Mortgage, but that being said I have a lot of flexibility. I'm still a commissioned salesperson, so how I choose to go about my business is almost entirely in my hands. I actually have *more* flexibility here than I did at the previous 2 broker shops that I was at. That's not to say there aren't good broker shops out there, just that I had bad luck ;) I have a lot of friends in the broker industry now and for every bad one out there, there are at least 2 good ones (that I've seen.)

sd · Joined: 07 Mar 2006 Posts: 19

One other very important issue to remember. Not all brokers work for the same amount of fee income. As I have said before if you know what rates pays the broker a certain fee you can use that as a level playing ground. If you have a appx. 620 score or higher and are doing a 95LTV or lower conforming loan 30 year fixed purchase or rate and term you can find that magic rate. Remember this also : not all brokers get paid the same amount of fees by the investors. Also some of them try to junk fee you to death (lots of extra fee income ). All brokers are not the same! It is your hard earned money you are spending so do your homework. I do not originate mortgages. I work in the secondary side of this market. I have seen a lot of loans where the broker made thousands of dollars even on conforming ones. $1000 would seem to be a reasonable amount but many times it is much more than that. Good comments from the other two with some good input from the brokers side. Knowledge is power. Hold on to those $$$$

jpm121 · Joined: 14 Feb 2006 Posts: 9

Holy smokes Chow, that was way more info that I deserved, but I'm glad you took the time to explain all that. It certainly cleared some things up for me. Thanks to Haplo & sd as well for the insight.

A follow up question, if I may -- as part of the process I'm planning to meet with someone at our regular bank, JP Morgan/Chase/Bank One/etc to see what they offer. Do these big banks generally offer special treatment to people who have been banking customers for many years, or will I basically get the same deal as anyone walking in off the street?

Second, is there a way to shop for mortgages without a bunch of hard credit inquiries? If I have my official bureau credit report and official FICO from myfico.com, can I provide those to a lender or broker to compare them? Or am I better off just doing 3 or 4 apps in one week and take the hit? Reason I ask is my credit is borderline, 631 middle score, and I don't want the inquiries to send me <620.

Thanks guys... you have no idea how nice it is for us laymen to be able to talk to professionals in an informal manner...

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Keep in mind that a consumer credit report is going to be weighted differently than a mortgage credit report, so you may not be exactly at 631.

That being said, you can generally shop around and get an idea before they pull your credit. Things might change after they pull your credit, depending on what your scores and history are like, so be prepared for that.

Usually you're not going to get *much* better even with the banking relationship, but sometimes there are perks offered. We have a few things depending on the type of mortgage you're looking for that are better than just a random off the street customer.

chow · Posted: Thu Mar 09, 2006 2:40 pm Post subject:

#1. I doubt the rate will be that much better, if at all.

#2. ahhhhhhhhhhhhhhhhhh, Don't shop too much and if you do-your score will most likely drop. That score you get when you order your own is NOT the same score you would get if a mortgage company or car loan company pulled it. Ours will be lower. Sad but true. I haven't gotten into the P's and Q's of the secret black box those credit companies use to figure scores in various industries, but we have had customers walk in our door, pull their own score off line-then we pull ours and it's different.

The first week they started that (FREE, but we charge you for a score!)-we ran a few of our customers through it. (I was working with a gal that used to sell credit bureau services for one of the big three.)

Excuse me while I step up on my soap box.

Getting your score on your own is -wasting your money! The whole point of being able to pull your own credit once a year, is make sure the creditors are reporting your payments correctly AND allow you to see if anyone has borrowed your name and credit for fraudulent purposes. Selling you a score that we can't use is just another way for them to make more money. OH, by the way, the credit bureaus sell your information to other brokers when your credit is pulled by JUST ONE mortgage company. (another way they are making money. Selling your activity to other brokers so they can call you too.)
Heck, you need not "shop."
:roll:
Just go to one mortgage company, and then go back home and sit by the phone. The "mortgage hounds" will find you!

okay, I'm jumping down now, and going to work. For some reason people keep calling and asking for information on FHA loans...

(make sure you have that option with the broker you select. Seller can pay 6% of your closing cost. Conventional is only 3%)