There has been a big upsurge in refinancing, so lots of people
are contacting new mortgage brokers. I recommend calling 4 or
5 to give a good basis of comparison. Even if you've got a
relationship with a broker, it's important to ask questions
when you begin the process. Here are the questions I asked
when screening mortgage brokers recently.
1. How many refinances did you close in the last year?
I'm not looking for exact statistics, and I wouldn't
disqualify anyone unless the number seemed very low. I just
wanted to get a feel for how busy the person is and what he or
she is juggling.
2. What is the turn around time like now?
Refinances can take months right now. Appraisers and underwriters are facing a lot of unknowns right now. This is creating uncertainty in turn-around times
at the moment.
3. Here is my basic situation. What type of mortgage do you
think is appropriate?
These days there can be different rates for people with credit scores up to 750
(850 is the highest score available.) You don't want to lower
your score by checking it right before you apply for a
mortgage.
Also, know what the loan balance is on your mortgage and what you think the
house is worth. If you don't know, check Zillow.com or Redfin
for some insight. Tell the broker how you arrived
at the number. One broker said that Trulia plus 5% is what
his appraiser typically came in at. This was before the new
appraisal process, so it might or might not be correct in the
future.
You might get a larger variety of responses that you expect to
this question. When I called brokers, I got two dramatically
different, and probably equally valid, approaches to my
situation.
4. What are your fees?
Fees come in many flavors. There are the bank fees, appraisal
fees, title fees, and "interest rate credits." The mortgage
broker may tell you they don't have control over the title
fees. Most don't. However, I spoke with one broker whose
company had its own title company; she would have a good idea
of the title fees. No mortgage brokers are going to pay for
the amounts that end up in escrow for your interest, property
tax, or insurance. Those might feel like fees you, but
mortgage brokers don't consider them fees.
You may end up going with a no closing cost mortgage. That
just means that the fees are rolled into the mortgage rate.
The fees are still there.
5. Will you guarantee the Good Faith Estimate?
The broker is required to provide a Good Faith Estimate of
your closing costs during the refinancing process. You don't
want new fees to come up a week before the closing. I liked
the brokers who said "absolutely" or "The fees I'm quoting you
now you can take to the bank. Period." I didn't like the
broker who tried to get me to look up the definition of
"estimate."
6. What is the process like, particularly at the beginning?
When do I have to pay the fees?
I wanted to know if I had to pay upfront or if I had to pay
the fees at the closing. Refinancing deals come to a
screeching halt for many reasons. For instance, your
appraisal comes in lower than you expect, making you
reconsider the deal. If you can find a broker who doesn't
charge for the appraisal upfront, it's a mark in that broker's
favor.
What question is not on the list? "What are your rates?"
Sure, you probably will ask. However, without a full credit
report and completed application, it's tough for the brokers
to give you accurate information. Expect them all to say they
have the best rates.
Originally published in 2009, the author updates this with new information periodically.