What is an Upfront Mortgage Broker
A Home Buying Article Contributed by Robert Scalia
In the World of the Mortgage Broker, How to Tell Who is Who.
In the world of the mortgage broker, there are a lot of sharks out there.
Keep in mind that the majority of mortgage and financial consultants out there are there to make money first and think of your needs second. It can be a very intimidating world indeed, filled with jargon and hidden contract clauses that could leave you and your wallet reeling in the end.
So before you decide to invest in a home and take out a mortgage, you should know a little but about the type of mortgage broker you want to be dealing with. A little research can go a long way and be the difference between the mortgage of your dream and the mortgage broker from hell.
So What Exactly is an Upfront Mortgage Broker?
An Upfront Mortgage Broker (Commonly denoted by the acronym UMB) is a broker who has elected to do business in an up front and fully transparent way. Now this may seem like an answer that isn't an answer at all, but there are some major differences between an upfront mortgage broker and a conventional mortgage broker that you will want to pick up on.
For starters, an upfront mortgage broker will always disclose their fees to customers in advance and in writing. Not only this, but he or she will always go out of their way to disclose the wholesale prices (both the rates and points) that have been passed on through them by lenders. This means that any customer dealing with an upfront mortgage broker will pay the broker's fee plus wholesale loan prices.
Conventional mortgage brokers, on the other hand, add a markup to the wholesale prices and therefore quote the resulting "retail prices" to customers without most customers being aware of that. Most of these mortgage brokers, in fact, only reveal their markup in the required disclosures after an application has been submitted.
Another important difference between the two is that an upfront mortgage broker does his or her best to align his or her needs with that of his customer. This means that they will often represent borrowers who are shopping for loans.
More conventional mortgage brokers who are shopping the market often find themselves in conflict of interest situations with customers. It could happen, for instance, that the loan type that best meets the customer's needs may not be the one that allows the largest markup for him or her.
It is also not uncommon for these brokers to profit by ignoring customer requests to lock the rate/points. And these mortgage brokers will often increase their markup on customers who allow the rate/points to float by not giving them the best available rate when the loan is finally locked.
Why One Should Entrust Their Loan to an Upfront Mortgage Broker?
An upfront mortgage broker will always credit customers with any rebates they receive from the third parties they are dealing with. Keep in mind that brokers will often receive rebates from lenders or concessions from home sellers. It is not too much to assume that these rebates actually belong to you, since you are providing the business.
