How to Spot a Good Mortgage Broker

It is apparent now given that federal authorities are investigating some mortgage brokers and lenders that there are unscrupulous brokers out there who have no one's interests at heart save for their own. While mortgage brokers are regulated by state laws and overseen by state agencies, they are under absolutely no obligation to secure consumers the best deal, or for that matter even one that is safe. Brokers are paid for closing deals with banks and other lenders – they are paid a commission on the deal. You may not actually hand over a check to the broker, but they are being paid for their services. Some brokers are paid by the lenders, others by the borrower. Mortgage brokers were in some cases being paid more to steer their clients towards mortgage loans with high prepayment penalties, which made it very difficult and costly for the borrower to refinance their mortgage later on.

What a Broker Should Do

A mortgage broker should look carefully at your finances and try to fit your situation to a suitable mortgage. There is a problem when a broker tries to steer you towards mortgage products which are risky for you, the borrower. Before agreeing to any mortgage, you should research it thoroughly to determine if the mortgage offered is genuinely a good deal.

Brokers work with banks and other lenders to provide all of the required paperwork to verify income and other financial information. This may include bank statements, W-2s and tax returns. You'll need to give your broker this information in order to apply for your mortgage loan.

What a Broker Shouldn’t Do

If your income is such that you really cannot afford to buy a home at present, avoid any mortgage broker who is willing to play with the numbers to get you a mortgage. These figures are intended to keep you from borrowing more than you can afford to repay. There are serious financial and legal repercussions to lying on a loan application – if you see any inconsistencies between the paperwork completed by your broker and the information which you furnished, say something before you go ahead and sign.

If you currently have a fixed rate loan and no real need to refinance, you probably still have brokers calling you offering to refinance. Remember that they are paid to close a deal, not necessarily to get you a better one.

A mortgage broker should furnish a good faith estimate and inform you of all the fees assessed to your loan before closing. Any missing paperwork and any discrepancies should be looked at closely before you sign anything.