Hiring a middle man isn't something my partner and I normally do.
But that's really what mortgage brokers, who act as the intermediary between lenders and homebuyers, are: middle men. Knowing that, we had — probably unfairly — stereotyped them to be unnecessary, tacking on extra fees and pushing products (cringe). So when our trusted realtor suggested we work with one to buy a new home in Phoenix, Arizona early this year, we were cautious ... and we had a lot of questions.
Knowing that we were moving from out of state and didn't have any connections, our realtor sent us recommendations for three mortgage brokers who had closed deals quickly and efficiently with previous clients. We investigated their websites and reviews to narrow down the field, and found two of the brokers had consistent positive customer service reviews.
Our realtor set up interviews with those two brokers in his conference room, and I was surprised to find that listening to them before asking our questions gave us both a good idea of who we were better able to connect with.
We asked many questions, but these five helped us make our final decision and put away suspicions about working with a mortgage broker.
1. How are you paid?
Our major concern was the broker fees and transparency throughout the entire loan process. Mortgage brokers typically get paid on closed transactions. Their broker fee is often embedded in the lender loan origination fee. We needed to be sure this fee wasn't going to be a large chunk of change.
Both brokers first gave the same answer when we initially asked how they are paid, saying we wouldn't have to pay them for any services. They handle the loan, run the credit, and collect documents without charging us anything.
Pressing a little further, we asked how their commissions worked. This is how we got the answer we needed: When the sale is finalized they receive a lender commission, which is part of the loan origination fee and wrapped up in the closing costs — about 2-3% of the loan total. The broker receives a portion of this depending on who the lender is.
2. What type of loan would work best for us?
Mortgage brokers are like personal shoppers who have access to a wide variety of lenders. They shop around for you and negotiate terms to find the best deal. We were looking for a broker whose next step was to find out more about us before suggesting a loan type.
One broker immediately handed us loan options without asking more than one follow-up question. This was a red flag that felt like product-pushing. The other broker followed up by asking us what we had been considering and a few detailed questions about our income, down payment, and future plans. This made us feel like our best interests were being considered.
3. What are your hours?
Being able to receive our pre-approval within a few days and close on a home quickly was a priority for us because we were in temporary housing. A bonus to working with a mortgage broker is not having to deal with traditional banking hours.
Each broker said they were always available by phone, text, or email, which gave us confidence that we could secure pre-approval and close on time.
4. Can you show us the breakdown for different down payment amounts?
Our first home was a zero-down loan through a local credit union's first-time home buyers program. Through the sale of our house, we had a down payment in the bank. We just weren't sure how much we should put down and how much we should save for the items we would inevitably need to fix in the new home.
We asked the brokers if they could provide a breakdown of the interest rate and fees for our house budget so we could compare the costs between putting 5% down and 20% down. They both accepted down payments as low as 3%, but only one broker had a program that could give us a full breakdown to show us our options. This sheet of paper was so handy in facilitating our discussion when we got home to look over the numbers, and helped us feel confident that this broker was knowledgeable and provided options.
5. Would you offer a rate match?
We were not going to make any commitments the day we interviewed the brokers. Instead, we had a plan to investigate a few other lenders and compare their offers to what the brokers provided.
Knowing this, we asked if they would offer a rate match. One broker said he could consider it, but he would give us the best rate he could find. That was not what we wanted to hear. The other broker told us he could, as long as we had an official offer. That meant money back in our pockets if we could find a lower rate elsewhere.
In the two days that followed, we looked for clear communication and swift responses. Both of the brokers were quick to return our pre-qualification forms with quotes.
The communication style was also important to us. One broker called us multiple times a day for small updates and questions. As busy professionals, this wasn't our preferred method of communication. If it could be sent in an email, that was ideal.
We found the perfect mortgage broker
We'll admit that a portion of our decision was about how much we felt connected and comfortable with the broker. There is a big element of trust when someone is handling your loan process and collecting documents. We felt more in sync and at ease with one broker. Here's a summary of what he did right:
- Made it clear that fees were minimal and wrapped up in closing costs
- Offered us a rate match
- Primarily communicated via e-mail or text
- Provided a financial breakdown for a range of down payment amounts
- Had ample availability