Getting the service of a mortgage broker makes the process of buying your dream home a smooth one. With the help of a broker and their connection with various lenders, you’ll get to choose a mortgage loan having the most favorable terms.
Although a broker’s main work is to help you make a good financial choice, some might not have your best interest at heart and will try to rip you off a lot of cash than you’ve budgeted for.
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How Mortgage Brokers Rip You Off?
A dishonest broker can try to rip you off by making you or influencing your decision of choosing a more expensive interest mortgage. This is because a broker is usually paid a certain percentage of the total loan.
When you get a good broker, he will guide you to a good investment. You need to know the various ways and tricks these brokers use to tell when you are dealing with one. Below are some signs that you watch out for in a broker.
- When the interest rate is very low compared to the normal market rate. This is probably a sign of hidden fees. Some dishonest brokers provide a way lower interest loan making you sign an agreement, then later introduce additional fees. In the end, some might even tell you that you’re not qualified for the loan. To avoid any hidden fees, make sure all fees are broken down to you in writing. Ensure you get a loan estimate with a confirmed lock rate and compare it with that of other lenders.
- When your broker is trying to convince you to go for a subprime loan that is expensive when you have all the requirements for a prime loan. This is a sign of a dishonest broker and it’s advisable you get another broker
- When your broker encourages you to refinance over and over again, you should consider getting the service of another broker. Refinance is simply called loan flipping and dishonest brokers use this trick to generate more fees for lenders and to borrowers more debt.
- It is a bad sign when your broker encourages you to add unnecessary services.
- Withholding vital information from brokers is unethical and this might be a sign your broker is trying to rip you off. Most unethical brokers hide information on prepayment penalties that are meant to be given in your loan documents. Make sure all the necessary documents are provided to avoid missing out on important information.
- Some scammers pretend to be brokers and they are the most dangerous to watch out for. They give you the best deal that is so good to be true and pressurize you to send them some money. Make sure the emails and addresses of the broker you are using are legit and void of grammatical errors. Any account you are sending money to should be authentic, possibly a business account.
- When you have a bad credit report, any broker assuring you that it doesn’t matter should not be trusted. Having a good credit report is important to getting a mortgage.
- Most brokers have a website or social media handles, make sure to check them up and go through some reviews. Any broker without proper identification should be avoided.
Make sure your broker is as transparent and honest as possible. A shady broker is not to be trusted. When you have any questions feel free to ask, a good broker will welcome all your questions and will answer them to the best of your understanding.
How To Avoid Getting Ripped Off By Mortgage Brokers
To avoid getting ripped by mortgage brokers, first, you have to be sure you are working with a licensed and professional broker. This way, you are sure you won’t be scammed and your broker will be ethical.
While working with trusted and licensed brokers makes sure to understand how a broker is being paid. Most brokers are paid a percentage of the total loan amount. Sometimes a broker gets 2% or 3% depending on the broker. Some lenders might cover the broker’s fees in exchange for the broker convincing you to a higher interest loan. This way, you will end up paying more interest throughout the life of the loan.
Always go through the loan documents and understand every bit of it before proceeding. In case you don’t understand any, make sure your broker explains to the best of your understanding. Most time people don’t know of prepayment penalties. This is when you pay off the loan earlier than expected. There is a penalty charge that will cover up the interest that would have been gotten by the lender. You must be aware of the penalty to avoid paying extra.
Above all, make sure you’ve checked out the broker before working with them. Most brokers have websites and social media handles. You can read up reviews from previous customers and know their experience with these brokers. Search for as many brokers as possible and choose from the best that suits your interest.
Is It Worth Using a Mortgage Broker?
Working with a mortgage broker is worth it when you get a legit broker. He helps you with the process of getting your dream home and saves you a lot of stress and other services attached. Below are some of the services provided by an ideal broker that makes his service worth the while.
- Mortgage brokers have a better understanding of the process and can help you get your dream house within your financial capacity. They help you understand how much loan you can get approved, and the eligibility criteria, and help you understand all documents related to the loan. Some brokers work based on commission tied to the total amount you a lender gets approved of.
- They have a larger network with lenders that you possibly do not know. Due to their relationship with lenders, you might get some extra charges like, an application fee waived. They know the right mortgage companies to turn to according to your budget. This way, most companies, and lenders rely on brokers for referrals.
- Applying for a mortgage through a broker saved you the stress of having to apply to each lender to know their cost, estimate, and whatnot. With a broker, you’ll get a rough estimate a lender can give, a closing estimate, and requirements due to their working relationship with the lenders. This makes everything faster and saves you tons of stress if you were to do it yourself.
- When applying to a lender directly, you’ll be charged quite a lot of fees like application fees, credit check fees, appraisal fees, and lots of other fees. A lender may be willing to wave some or even all of these fees which you won’t get had you apply yourself.
A broker does quite a volume of work for lenders and mortgage companies by bringing them, clients. They know how to get you the best deal with the best interest rate that you might be able to on your own.
How Do I Know if My Mortgage Broker Is Bad?
Your broker is meant to work with your best interest at heart. Unfortunately most brokers these days are only after their interest. While working with a broker some shady things can indicate that the broker is bad for you. Here are some signs of a bad mortgage broker
- When a broker keeps encouraging you to go for a loan with a higher interest rate that you cannot afford.
- When your broker is not being honest and you notice him hiding some information. This is a bad sign and you should not work with him.
- Any broker who fails to pay your fee, making you pay extra for lateness is bad.
- Always work with a licensed broker. Any broker without a license is possibly a scammer who might run away with your money.
- When your broker makes an offer that is too good to be true. The possibility of it being too good to be true is higher. The loan might come with some hidden charges, making you pay way higher interest than normal.
- When your broker tells you having a bad credit record is not a problem when it is a problem, then he is bad for you.
- A good broker won’t rush you or pressurize you into signing. He will work you through the whole process gradually and you’ll sign all necessary documents after you’ve understood and agreed to all terms and conditions.
- Any broker encouraging you to lie on your loan application is a sign that he’s bad for you. Your lender can sue you as this is considered fraud by the FBI.
- Make sure to go through all documents before signing at the closing tables. If you notice any change, especially fee changes that is a bad sign. You should ask for an explanation and not sign any documents until you’re satisfied with the answers.
Above all trust your gut feelings. Always pay attention to your intuition, because it might be just what will save you from a bad broker.
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Conclusion
Most brokers these days are more concerned with their selfish interests than the interest of their clients. They make their client go for mortgage loans with higher interest rates because they get paid a percentage of the total loan money.
To avoid getting ripped by mortgage brokers, you must ensure you seek the service of a licensed broker who has good reviews from previous clients.