First time home buyer, should I use a mortgage broker or go directly to a bank?

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Getting mixed reviews on which route I should go. A friend suggested a mortgage broker they used, I’ve been in contact with him and he’s requesting $450 for the loan application. Is this a normal fee for this application? Just looking for some suggestions here.
Responding to the answer from “Landlord”.. the mortgage broker is requesting the $450 fee be paid up front, does this sound right?

9 comments to First time home buyer, should I use a mortgage broker or go directly to a bank?

  • Angry Bird  says:

    I’ve never used one.
    I just choose about 5 banks and compare them myself.
    Go to Bankrate.com and click on mortgages.
    Do not fall for points, ARMS, 5/1’s, 5/5’s, options, etc.
    Demand a fixed rate mortgage.
    Then you choose one and get pre-approved for a mortage. No fee for pre-approval.

  • loanmasterone  says:

    Normally a mortgage broker would not charge a fee for their services until the end of the transaction.

    Mortgage brokers have more options and mortgage investors an dprograms. A bank only use their assets an dprograms.

    Buying a house is a step by step process, this is the first step you should take in order to purchase a house. The rest of the steps will fall in place, no matter the type of property you are purchasing.

    In order to find out the type of loan programs you are qualified for you will have to fill out a loan application, with a mortgage broker, you can find one in your local telephone book.

    Make sure this mortgage broker or mortgage banker is able to do government loans such as USDA, FHA and VA loans if you qualify for one. With a VA mortgage loan you are not required to have a down payment, this will save you on closing cost.

    He will fill out this application, which takes awhile so grab your favorite beverage and sit down. Once you have completed the application, he will run your credit report which will have your credit scores. These credit scores will determine your interest rate.

    The amount of your monthly debt payments you are required to pay as per your credit report and the amount of mortgage you can take on based on your income will determine the amount of house you will be able to purchase.

    When you speak with the mortgage broker you will need the following documents to complete the loan application, there will be others, but this will get you started.

    #1 One month of pay stubs for each person that will be on the mortgage.

    #2 Six months bank statements from each bank in which you bank as well as statements from any 401K from you place of employment.

    #3 Two years of federal income tax along with the W-2 that match.

    Once he has all that he need to do he can then issue you a pre-approval letter so you can purchase a home. In this pre-approval letter will be the amount of house you are qualified to purchased.

    Once he gives you this pre-approval you may now find a real estate agent to find yourself a home or he might have a referral.

    Now make sure before you get your pre-approval you and your mortgage broker go over all your options as to the mortgage programs you qualify for, the interest rate, monthly payments.

    If you are getting a FHA, fixed rate, two loans to eliminate PMI like an 80/20 or one loan, if you are qualified for and approved for a 100% loan.

    You should select the loan that best suit your financial condition at the time. That could be an adjustable rate loan. It could be a fixed rate loan for 5 or 10 years and then adjust. Some adjustable rate mortgages only adjust once.

    Make sure your mortgage broker explain all your options so you may make an intelligent decision.

    What might be good for one person might not be good for you, in other words just because your friends and all your real estate buddies are telling you about the great fixed rate they got, your financial situation might call for something else.

    So select the best option for you and your financial situation.

    You should also get a Good Faith Estimate (GFE) which will indicate the cost you will have to pay for getting this loan. It will also indicate the amount of your down payment.

    Once you have found a home the real estate agent will then prepare a contract for you and the seller to sign.

    Your mortgage broker will now order an appraisal to show proof of the property value.

    The mortgage broker might ask for additional information or documentation, don’t get all up tight this is normal, just supply the information or find the documents needed.

    After the appraisal has been completed you will be called by your mortgage broker to sign your loan docs so you can take possession of your new home.

    Before signing any loan docs make sure they say exactly what you and your mortgage broker went over when you decided on what mortgage program was best for you.

    I hope this has been of some benefit to you, good luck

    “FIGHT ON”

  • Sam Davis  says:

    Go to a bank. Do your research online.

  • Landlord  says:

    I use a broker. Since you have a recommendation I would go with them. There are a lot of unscrupulous people in the mortgage business. Some spam here, anything you receive from here will be suspect.

    Everyone is going to charge you for the application. It is included in your closing costs, which you pay at the end of the process, not the beginning.

  • CoolCat  says:

    A mortgage broker I send my clients to has never charged any fees up front.
    Your mortgage broker may use that $450. for things like the appraisal, credit report, etc. Ask him before moving to another bank.
    Any loan/mortgage fees will be included in the closing costs except the appraisal which is always paid up front by the buyer.

    I would check with YOUR bank or credit union and other banks in your area.
    Ask if they have any up front fees and what those fees cover.

  • Make it happen  says:

    BANK, BANK, BANK!!! I’ve purchased six homes over the last twelve years, three times using a Mortgage Broker. Mortgage brokers are like the guy on the street corner trying to sell you something. You really don’t know what you’re buying. It could be legit, it could be a knock off. Either way, the broker is just trying to get you to pay them as your agent. They only make money if they get you into a mortgage and they don’t care what that entails…

    A mortgagor at a bank will still make their paycheck with or without your business. A bank has somewhat higher standards on their mortgages and the fees are what they are, they won’t change when you sit down at the closing table.

    If you go with a Mortgage Broker, be ready for a roller coaster… I will never buy with a Broker again.

  • elby  says:

    You don’t pay anything up front. You pay at closing. I’d never pay anyone before they did the job for me, I don’t care what they want. He could get you one mortgage and say that’s it, and then you’ve paid him $450 for doing almost nothing, and you would have an almost impossible time getting the money back.

    I’ve bought and sold several houses. I always found a bank myself. All you need to do is call around (check Bankrate.com for mortgage rates, and sometimes you can find the cheapest mortgages there, too). If you pay a broker, all they are going to do is either call around to find something for you, or else send you to someone they already know and get a kick-back in addition to what you paid them.

    Call several banks and ask about their mortgage rates, and then pick one you think is good and go visit them. They probably will offer you a rate and then offer to let you lock in a particular rate for a certain time period (like, a 7.1% rate and it is locked in for 10 days, for example), and then they may ask for a deposit from you in order to hold that rate. They do that because rates may change from day to day, and this way you’d have something guaranteed until you are ready to commit.

    But I’d never use a broker, and I have never used a broker. And certainly not one who asked to be paid up front.

  • rswpbc  says:

    As a first time home buyer I would suggest you check with your bank first or if you have a Credit Union talk to them. The guidelines for loans are always changing and you want to be able to find someone knowledgeable for your area. You want to ask to be pre-approved so that when you start interviewing agents, they will know you are serious.

    A mortgage broker is out of line when he asks for money up front. Until you get a Truth-in Lending Statement and a HUD-1 (or Estimated Settlement Statement) from your lender that tells you what your costs are do not pay anything up front. The only upfront fee is to the home inspector which is $450 and you pick what company you want to use and pay them directly. There is a loan origination fee but that is paid through Escrow as all other fees are. The bank can chose to use its in house appraiser or an independent appraiser and that should be paid through Escrow as well.

  • DanK1958  says:

    1. Yes, you have to pay a fee upfront… the bank or broker has to do a lot of work and possibly pay for a $450 appraisal and you could walk away leaving them with the bills. Note, it will cost at least $1000.00 to a bank just to close your loan. USAA bank will charge $350.00.

    2. Go with whomever you trust the most. Shop rates online at chase.com, usaa.com, bofa.com and wellsfargo.com, read everything you can and make an educated decision. If you or either of your parents were in the military, then I highly recommend you go with USAA bank… they are one of, if not the best lender in the country.

    Note, you can’t get a binding quote until your credit is pulled and you’re ready to lock your rate. Until then… the rest is just talk.

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