When you interview mortgage agents you are intent on working with, you can take the opportunity to learn about loan terms, interest rates, and the various types of loan programs available. Not all mortgage agents have the same skill level and expertise, however. When you’re in the market for a mortgage agent, you should address the following concerns.
Determine whether the agent has the patience to sit down with you and explain all the features of various loan programs. If a agent is representing too many lenders at one time, he or she may not be well versed in the nuances of each loan program. Be careful of agents who don’t seem to be up-to-date with the specifics of each loan.
Ask what the commission is. It is common for mortgage agents to receive a commission from anywhere between 0.5 percent to 2 percent of the amount borrowed. What you may not realize, however, is that the fee may be flexible. The agent is, in essence, a middleman, and determining whether you’re getting overcharged is always more difficult when independent contractors are involved. Ask the agent for his or her opinion on how they decide the commission rate. Agents have an incentive to push programs with high points and interest rates because their commission will be proportionately larger. It’s your money on the line, so don’t be afraid to negotiate.
What does the agent’s list of lenders look like? How does the agent reach out to new lenders to acquire new and better loan options? There are a few mortgage agents out there who never shop around. Either from laziness or habit, the stick to the same lenders and don’t bother to represent new lenders. Asking your agent how many lenders he or she currently works with will give you an idea of the type of representation you can expect.
Be wary if a mortgage agent pushes loans such as interest-only. They are risky. With interest-only loans, you may defer paying down principal until a specific date, after which you will owe a lump sum of money that is due at once. If you can’t come up with the lump sum amount, you will need to refinance for the full purchase price again. Be careful with these types of loans.
Mortgage agents may ask you to sign an exclusivity agreement. This means that you cannot work with any other broker. There is a great deal of work that goes into finding a deal and agents don’t want to waste their time. However, it is not often that this happens.
Further an agent should not ask for a deposit to start working on the loan unless the loan is over $300,000.00 then one can be requested by the agent. However, you need to know if you will get your deposit back if they cannot place the loan. Most mortgage agents will waive the deposit requirement particularly if you have signed exclusivity agreement.
With some perseverance, you can perform the due diligence involved in retaining a mortgage agent. A good mortgage agent can give you access to a greater variety of loan programs, lenders, and deals. They are the intermediaries who can make your dream of owning a home a reality. As such, be prepared to spot potential issues that may reveal when a mortgage agent is not a good fit.