More than half of mortgage borrowers get their loans through brokers. The main advantage of using a broker, instead of going through a bank, is that the broker can shop among various lenders to find the best deal.
Many mortgage brokerages are small businesses.
Borrowers often feel, whether justified or not, that they can trust big-name lenders such as Wells Fargo, Washington Mutual and Citigroup, but they often don't feel as confident about small-name brokers with paltry advertising budgets.
If that describes you, here are four questions to ask a mortgage broker whom you're thinking of dealing with:
Can I get references?
Ideally, you found the broker through a reference from a friend, relative or co-worker. But if you selected a broker through another criterion -- maybe you drive past the broker's office every day, or you responded to a direct-mail advertisement -- you can request references.
Ask for the names and contact information for the most recent two or three customers who closed their loans. Then follow up by calling them. Ask if they were treated fairly and if the broker's good faith estimate of closing costs was accurate. Above all, ask if they would do business with the broker again. You might find yourself talking to a borrower who already is a repeat customer -- someone who got the original mortgage through the broker, then refinanced through the same broker. That's a good sing.
How long have you been in business?
"I get asked that more than others," says Ray Champion, president of Pro Mortgage Corp. in Dallas. "I guess people want someone who's been doing it for a while."
How long is long enough? Even a newbie to the mortgage business can give good service, but if you're looking for someone who didn't jump in to surf the current refinancing wave -- in other words, someone who had a career in the mortgage industry in slow times as well as in today's frenzied times -- choose a broker who has been doing home loans for at least three years. Preferably more.
Thousands of mortgage brokers have jumped into the business since the refinancing boom began in early 2001. Many of them won't be around when the refi boom ends. Your broker is more likely to stick around if he or she was brokering home loans back in the relatively lethargic days of 1999 and 2000.