After the recent Miami Herald exposé on Florida’s mortgage broker industry, you’re probably wondering how in the world you can find a mortgage broker who won’t rob you blind. I’ve put together a list of steps that any prospective borrower can take that will be highly effective in weeding out the con artists and the fee-padders.
Look for a broker before you start looking for a house.
If you’ve already got your heart set on a house and need to put in a bid, then you’re setting yourself up for a huge time-pressure crunch that can lead you to make some very bad decisions. Pick your broker and get your loan before you start shopping for a house, so you have time to fix any problems that might come up or even back out of the deal if you have to.
Look for someone who’s been in business for a while.
Whenever the market booms, all kinds of shady operators come out of the woodwork and set up shop as mortgage brokers. When the market tanks, the brokers of ill repute will be the first ones to fold up their tents and walk away. Look for someone who’s been around a while - someone who has ridden the ups and downs of the market, and has survived tough times because they have a good reputation in the community.
Look for someone who’s not trying to push the latest fad loan on you.
Mortgage brokers push fad loans for a reason - they make more money on them because you pay more money over the life of the loan. Certain types of adjustable-rate mortgages, interest-only loans, and other creative arrangements are popular with lenders because they’re popular with brokers, but they end up costing more in the long run. Do your research before picking a broker, know what type of loan you’re looking for, and reject any broker who tried to push the latest thing on you just because it’s popular or looks like a great deal - at first.
Get references from people who know the good ones from the bad.
People find mortgage brokers in many different ways. But with a transaction this size - for most people, the largest deal they’ll ever sign - it makes sense to be extremely careful about who you pick. It’s not enough to use the guy your next-door neighbor used, unless your neighbor has the relevant knowledge to be able to judge what kind of job the broker did for him. Who might know good, honest brokers with a long and proven track record? Anyone who’s in the financial field or handles those types of deals for a living is a good choice. But make sure that the referral is coming from someone you know well enough to trust, and someone who doesn’t have anything to gain from the recommendation. A banker, a lawyer, a real estate agent who’s not part of the deal - all those people in your community might have good names for you to check out.
Check the broker out with the state licensing board.
In Florida, the Office of Financial Regulation is responsible for overseeing the licensing and regulation of mortgage brokers. Certainly, they’re not foolproof, but if a mortgage broker has some pending disciplinary action or a criminal record, you’ll want to know. It sure can’t hurt to ask.
These steps aren’t foolproof, but they will go a long way to making sure you don’t get ripped off by an unscrupulous broker next time you get a home loan.