AIME Magazine AIME Magazine Summer 2018 | Page 27

EVERY YEAR , homebuyers unwittingly pay higher mortgage interest than they should — sometimes thousands of dollars more — because they don ’ t know how to find the best loans . The Consumer Financial Protection Bureau ( CFPB ) estimates that 47 percent of consumers don ’ t shop around to find the most affordable mortgage . They simply get their loan through the first mortgage professional they speak with — or the first result that shows up in their Google search . That ’ s too bad , because it could be costing them a ton of money .
For anyone who doesn ’ t work in the real estate industry or a related field , the language of mortgages can be very confusing . In fact , when talking about mortgages , many people use the words “ broker ” and “ lender / banker ” interchangeably . But the truth is , there are big differences between them , and knowing what they are can improve your experience and save you a lot of money . Competition Saves Consumers Money For example , on a $ 250,000 , 30-year , fixed-rate loan , a half-point difference on the mortgage interest rate means paying $ 75 extra per month , resulting in $ 27,000 in extra payments over the life of the loan . And depending on how the loan is structured and how high lenders ’ fees are , the costs could be even more . That ’ s why it pays to shop around , and mortgage brokers do that for you .
Even if a homebuyer has already been prequalified by another lender , it ’ s always worth calling a mortgage broker to see if they have a program that is better suited to that buyer ’ s particular situation .
According to data from the Thomson Reuters secondary mortgage platform , mortgage brokers save their clients one-quarter percent on their mortgage interest rates over the rates offered by bankers . That ’ s more than $ 10,000 over the life of a typical $ 250,000 loan . In more expensive markets , the savings are even bigger . It makes sense : competition drives prices down . Brokers have relationships with dozens of lenders who compete against each other for your business .
There ’ s something else consumers should know when shopping around : if you call a bank and ask for the interest rate on a 30-year fixed-rate loan , they might quote you one , but there ’ s no guarantee you ’ ll actually get that rate . Rates change every day , and the rate a consumer gets depends on their down payment , credit score , and other qualifications . Nobody knows what their actual interest rate will be until they apply for a loan and lock in a rate .
What Are Their Incentives ?
Mortgage brokers cannot be compensated based on the terms and conditions of your loan . That helps ensure your broker gets you the best loan for you , not the one that pays him or her the highest commission . The same is not true for a bank ’ s loan originator . And that extra compensation can easily be disguised in the rate sheet where a typical consumer wouldn ’ t recognize it . Is a banker going to recommend the loan that makes the most economic sense for you or the one that compensates him or her best ?
Mortgage brokers are vetted , licensed , and bonded . They are required to take continuing education every year . Loan originators who work for banks are not licensed ; they ’ re simply registered . Work with a Local Mortgage brokers live and work locally . You ’ ll have their email address and cell phone number whenever questions about your loan arise . Brokers know they ’ re going to run into you again at the supermarket or at their kids ’ ball games , so they want to make sure you ’ re happy with their service and eager to give them great reviews online and refer your friends to them .
Mortgage brokers don ’ t have the advertising budgets that the big banks do , so they rely very heavily on referrals from real estate professionals and past clients .
Putting a loan together is a long , cumbersome , and heavily regulated process . It is crucial that your loan is done correctly and on time for your closing . A mortgage broker who can ’ t perform on time will quickly go out of business . Does a big-bank loan originator who lives across the country risk his or her professional reputation if your closing is delayed ?
Finally , most banks are huge and offer all kinds of loans , not just mortgages . A mortgage broker is a specialist who only works with mortgages . When you buy your next home , get a local expert in your corner . Work with a mortgage broker .
Born and raised in Portland , Oregon , Andy Harris is a nationally recognized Mortgage Professional who started his career back in 2002 after spending several years showing interest in real estate and finance . Andy ’ s prior experience in business management and client relations brought him success his first year becoming the highest annual producing Loan Officer in the Western Region . Andy earned many awards as a young Mortgage Professional including the President ’ s Million Dollar Club and Leadership Council for Outstanding Achievement .
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