Are Mortgage Brokers Really Useful?!

I'm surprised that this question hasn't been asked before but here goes:

Working on a loan thru a mortgage broker. All said and done, I am getting a loan through Homecomings for 80% and thru a local credit union. Rates are 6.75% for 80% and 9.5% for the credit union. Now, when I started working with the broker, they pulled my credit report assuring me that they would only have to pull it once. Anyways, both Homecomings and the credit union have pulled my report multiple times since this process started.

My questions are:

Why do they have to pull separate reports if the broker already pulled one?
If the banks are going to pull a report anyway, why does the broker even pull one to begin with?
The rate on the second is really high AND it is only amortized over five years so the payments are huge. My scores are in the low 600's and the broker says this is the best that they can do with my scores. Is this true? Is such high interest and short amortization all I can qualify for on a NOO?

Since I am paying broker fees and such at closing, I am wondering if it would have been better to just approach the banks directly. I don't think that I could have done any worse than the terms that I am getting here. Am I being naive thinking like this?

I am sure that there is benefit to mortgage brokers. I'm just trying to understand where it is and if maybe I should include them in my toolbox as I continue to learn.

Thanks for your input.
JS.

I work at a brokerage shop as an assistant manager I'll tell you the main differences (granted my perception may be a bit swayed). When you go to the bank, they have many deals, and normally they only like the cookie cutter deals, they can get other things done, but they definitely are not willing to spend as much time on it as a broker. As far as having your credit report pulled, the broker will pull it first in order to make sure that you qualify before they waste their time. Remember, we aren't just looking for your score, we are looking for your total monthly payments, andy mortgage or consumer lates, and trade line history (this is especially important on stated deals). The lender will than go ahead and pull another credit report, because they may have different scoring models than the broker (Trans Union, Equifax, & Experian all have an old scoring and new scoring model many brokers unfortunately do not know this, so they blindly pay for a credit score that is no longer accurate. The lender pulls their own credit as a safegaurd from issues like this, and/or fraud) Each time one bureau is pulled it shows as a hit on your credit, so what will happen is your broker pulled one tri-merge, and than the lender pulled another tri-merge to you it looks like your credit was pulled six times when in actuality it was only pulled twice, if you have anymore inquiries than this within 30 days than something strange is going on (also for your knowledge your credit score will not only be dropped for an inquiry by any mortgage/lending company within 45 days this means if you had 200 brokers pull your credit within 45 days than your credit should only be hit one time). I do not know what percent the second was at, but if it got you to a total CLTV of 95-100% than I say that you did pretty good considering your credit score, and the bank probably would not have closed it anyways. Also If your Broker did his job right, than he took your calls, always kept you in the loop, and closed quick all of which the bank doesn't seem to be able to do, especially on these sticky deals. I hope this answers your questions.
Dustin Brumley


[ Edited by norrist on Date 04/08/2005 ]

dust10b,

Thanks for your reply. So if I get you right, you are saying that the rates I'm getting are standard for my scores? With the hype about low rates I thought they were high. So are you saying that if I hadn't gone with the broker, I may not have been able to close this deal?

With regards to the credit report, I have heard a number of times that pulls from a martgage co. within a specific time only count as one hit. However, my scores dropped by about 15 points in 8 days between being pulled by the broker and being pulled by the bank and there was no other activity or difference within those 8 days. Strange, huh?

Broker did an okay job with regards to responsiveness and returning calls, but not in my opinion much better than would have been done with a bank.

Oh well, ... Live and learn.

JS.

The big value I see in Mortgage brokers is the same I see in insurance brokers.

They have relationships w/ 100s of lender and based on the structure of my deal (sounds like it was an 80/10/10 or an 80/20 NOO, low 600, etc.)

Based on this info, the broker might know there are only 2 banks and 2 credit unions that can do the deal, whereas you'd have to give your story (and permission to pull credit) to say 50 banks before figuring this out.

Also, if you get to know the broker and use them more supposedly they will give you better rates as the have the spread between wholesale and retail pricing to play with.

bty, I'm not a broker, and generally don't use them unless I have an odd-ball property or loan structure.

I just tried to get a refinance on my subject to property thru just a loan officer and they had no idea what was going on. I have a broker working on a refinance now and he is working hard at it and seems like he knows what he is doing. I like having someone on my side making myself look better in the eyes of the bank.

Your credit may go down temporarily but in the course of 30 days you will only have one hit against yuor credit when shopping for a mortgage. When shopping for cars, you have a 14 day window where car loan inquiries only count as one as well. [addsig]

your rates are not bad consider your credit score

Yes,
Your rate looks good. However I probably would have done the HELOC over 15 years instead of 5.
Whenever I give a HELOC I feel like I have to make the payment amount lower and more attractive to offset the high rate. Ussually HELOC's are not high loan amounts, so don't let the higher looking rate scare you.
I gave one of my clients a 10,000 interest only HELOC at prime+1, and his payment was only 70 bucks/month. So don't let it worry you too much.

-Source