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Saturday, February 8, 2014

Search beyond mortgage broker vs

Search beyond mortgage broker vs

Q: My daughter is a firsttime home buyer. The townhouse she wants to buy is through the owner. Is it better to deal with her bank or a mortgage broker for a mortgage? Also, is there a way to check out a mortgage broker to see if he is OK and trustworthy? Pam Nelis, Level Green

A:The big difference between banks and mortgage brokers is that banks originate loans, while mortgage brokers act as intermediaries between you and a lender.

Some say going to a bank is better because it cuts out the middleman and the fees involved. Others say mortgage brokers are best because they can negotiate lower interest rates from lenders in return for bringing in lots of business. In other words, the broker fees could be more than covered by securing you a better rate than you could get on your own.

Brokers also point out that they can save you some legwork finding the best rate since they usually represent multiple lenders.

Truth is, unless you take the time to shop around, you won know which is the better deal.

Besides mortgage brokers and banks, broaden your hunt to include big mortgage banking companies, such as Countrywide Mortgage. If you a member of a credit union, or are able to join one, try there, too. If you have a brokerage account with a securities firm such as Merrill Lynch or Charles Schwab, also ask about their mortgage offerings. He recommends comparing rates, points, terms and fees at at least a dozen places.

Real estate agents can give you an idea of where to start looking, although in Pam daughter case, there is no agent to ask. You also can order a weekly rate survey for $10 from HSH Associates 18008732837.

Borrowers in special situations those with poor credit or little money for a down payment, for example may need to turn to a mortgage broker to help locate a lender willing to do business.

As for checking out the trustworthiness of a mortgage broker, Gumbinger advises dealing with only those recommended by family, friends or coworkers who can vouch for the broker track record.

The industry reputation has been spoiled in recent years by a few bad apples caught in predatory lending schemes preying on poor, elderly and firsttime home buyers, but the majority of mortgage brokers undoubtedly are honest.

Still, there are steps you can take to help protect yourself.

First, contact the Pennsylvania Department of Banking to make sure the broker you considering is licensed, which is a requirement in Pennsylvania.

By dealing with a registered broker, you have the state banking department to turn to in the event of a problem.

Gumbinger also recommends asking brokers questions about their credentials, such as how long they been in the field and whether they belong to any trade associations.

Flybynight guys will come and go, but reputable brokers will have ties to the community, he said.

The best news for home buyers is that it a good time to be a borrower.

Although mortgage rates have been creeping up in recent weeks, they still extremely low by historical standards, with 30year fixedrate mortgages hovering around 6 percent nationwide and 15year loans averaging around 5.3 percent.

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