Short of flat out committing fraud, sometimes agents will put you in a product and not fully explain the penalties, lawyer fees, brokerage fees, etc. You’ll occasionally also get hit with appraisal and inspection fees.
The only time mortgage brokers should be asking for a fee is if you have extremely bad credit and they have to excessively shop and negotiate with lenders. Mortgage brokers may also request fees if you have a commercial property or a second/third mortgage where private money is required.
Most of the time, mortgage brokers are paid by the lenders.
Another deceptive practice is mortgage brokers who don’t fully disclose the costs involved in a refinance or a loan. You might not even get informed about payout penalties.
You also want to watch out for mortgage brokers who pressure you to go with a specific lending company. They may tease you with a great rate and tell you your payments and fees without your mortgage penalty. But then when you want to refinance or move two years down the road, they charge you a benchmark payout penalty and benchmark interest rates and fees.
As a result, you have to pay penalty fees on top of the interest penalty. So then you’re stuck in that mortgage unless you’re willing to pay thousands of dollars.
Of course, there’s nothing wrong with this situation as long as your mortgage broker makes you aware of everything upfront, and you understand you must stay in a property for a certain amount of time.
From a bank perspective, be hesitant of a quick pre-approval process. You may have your credit pulled, get asked a few questions and then – almost instantly – get pre-approved for a loan. Ask for a written commitment with a list of conditions to move it to an actual approval.
But once you bring in a live deal and go to get financing, the bank requests all types of new documents and then you find out you don’t qualify for some reason. To avoid this problem, make sure you fill out a complete application and all necessary documents are collected ahead of time.
You can also help any lending situation by being upfront when presenting your information. Don’t inflate your credit score, don’t exaggerate your income, and be upfront about your employment.
Mortgage brokers work under confidentiality laws and rules. By not disclosing all your information is like going to a doctor with an ailment and failing to tell him all your symptoms. Almost everyone has a few issues that need working through, it’s not a big deal at all.
