by Eli Chisholm

Created on: March 12, 2010

Finding an honest broker really isn't too hard; all you need is a little bit of extra education.  I used to be a broker, so this is coming from the source; I hope it serves you well.

What you don't know can end up costing you in the long run, and the most important thing to know when it comes to mortgages (for  the buyer, at the beginning) is the Good Faith Estimate sheet.  It lays down all of the anticipated costs that go into the mortgage: appraisal fees, underwriting fees, title research fees and title insurance, etc.  Some of those fees are necessary and in many cases fixed in stone.  What we're going to talk about are the negotiable fees; those extra little costs that show up, but don't seem to have any purpose.

That's because they don't, or can be moved around for your benefit.

First, anything that has a vague sounding name: maintenance fee, handling fee, application fee, etc, are just extras that are being added to bleed you for cash.  If you see them, ask to have them removed.

Second, brokerage fee.  This is the primary way your broker makes his money.  DON'T be stingy with this; since it will save you money in the long run, typically through a better interest rate.

Have you heard brokers or bankers talking about points on the front or back?  What they are talking about are percentage points; basically commissions.  When a broker makes points on the back, they are actually being paid by the bank they are going through to give YOU a higher rate.  Points on the front, on the other hand, are fees that the broker will pay the bank in order to give you a lower interest rate.  Brokers don't like to talk about points on the front though, since it comes out of the broker's pocket, by means of cutting his commission.  And I don't care HOW nice that person on the other line sounds, they're not going to cut their throat for you.  Generally, the rule you want to follow if you are asking for points up front to lower your interest rate is to leave at least 1 point greater on the brokerage fees compared to the cost of the points up front.  The other option is having no points on the front or the back.  This is called par rate.  Make sure your broker is getting paid, and I guarantee you they will work well for you, and save you a lot of money in interest in the long run.

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