How to Know If My Mortgage Broker is Legitimate?

May 1, 2023

Mortgage brokers are professionals who bridge the gap between mortgage providers and prospective homeowners. These professionals are often paid in commission by mortgage providers for their efforts in steering customers their way. The functions of a mortgage broker set them apart from loan officers who are tied to one specific lender. With mortgage brokers, prospective homeowners have a chance to access several home loans options from many different lenders without having to visit each one. Mortgage brokers not only help prospective homeowners save time and energy but can also influence the applicant’s decision. Their influence on the customer’s choice is one more reason why potential homeowners should seek out a trusted mortgage broker in Hobart. 

To ensure that you choose the right mortgage lender, consider their credentials, references, and experience. It is also important to know the common red flags that may come with the process. Below are some of the ways to improve your chances of choosing a legitimate mortgage broker.

Ask for Referrals

Asking friends, colleagues, family, and neighbors for referrals to mortgage brokers can save you a lot of stress and help you cut down the time spent on vetting the many available options in your area. You can discuss your specific needs with these people, and they may be able to share their experience to recommend or warn you from engaging with certain mortgage brokers.

While asking for referrals, you should know that there are different mortgage options. You need a vast mortgage broker in the different available options to improve your chances of making the right decisions.

Interview Several Mortgage Brokers

Although you may have gotten a few suggestions from family and friends, make sure not to take it at face value. Do your own research into each of the recommended mortgage brokers and add to the list if necessary. Once you have a comprehensive list to work with, begin the interview process. Before making a commitment, ensure that the mortgage broker is properly vetted. Ask for their current and valid license and how long they have been in the mortgage business. You should also ask about their past clients. Ask about their network of mortgage lenders, the different types of mortgage loans they can help you with, and more.

Check for Professional Affiliations

Ahead of committing, you should also check whether the shortlisted mortgage brokers belong to any professional associations or bodies in the local area or at the state level. Affiliations with groups, associations, and trusted bodies add to the mortgage broker’s credibility and improve the chances of satisfactory service.

You can also use state government websites to research each of the options you have on your list. This will give you an idea of possible lawsuits or complaints that have been lodged against mortgage brokers in the past.

Common Mortgage Scam Signs to Watch Out for 

Sometimes your due diligence in picking out a mortgage broker may not be enough. You need to know the common signs of a scam artist and how to avoid making the wrong decisions. This aspect touches on the common scam signs to watch out for.

Not Caring About Your Ability to Pay

Mortgage payments are an important part of your mortgage loan and agreement. Your monthly payment should not exceed 28 – 30% of your income. If your mortgage broker seems too keen on closing the deal irrespective of whether your monthly rate exceeds this benchmark, you may be dealing with a scam artist who cares more about their commission than your financial wellbeing.

Excessive Loan Costs 

Many home loan costs are fixed irrespective of the amount borrowed. Large borrowing may attract between 2 and 5% for the loan costs, while smaller loans of $150,000 or less may attract over 5% in costs. Some lenders work this rate into the monthly mortgage payment, while others offer an option to pay it off separately. Your mortgage broker should clarify this area to avoid incessant and increased costs. You can also speak to other mortgage lenders to get an idea of what is obtainable on the market before deciding on what to do.

Upfront Payment Demands

Scam mortgage lenders may demand that you pay an upfront fee before the loan funds are made available. This, in most cases, is a red flag that should not be ignored. To avoid losing money to fraudulent brokers or lenders, you should strive hard to ensure that the demanded payments are clarified from more than one source and independently verified.

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