Choose a Mortgage Broker Who Will Work Best for You
In the last two chapters I discussed four very compelling reasons why you should employ the services of a commercial mortgage broker. And since you are reading this chapter you probably agree with my assessment. Congratulations! Great minds think alike!
I’m going to let you in on a secret: not all commercial mortgage brokers are equally trustworthy, competent, and likeable. So if you’ve decided to use a commercial mortgage broker then I have three very important suggestions.
First of all, when selecting a commercial mortgage broker, absolutely do not consider using a residential mortgage broker. Residential mortgages and commercial real estate mortgages are completely different loan products. A residential mortgage broker does not have the expertise to finance commercial real estate loans. They will be totally out of their element and they will completely screw it up.
Secondly, don’t just choose a mortgage broker. Interview some and then decide. They will be representing you and you want the best qualified and most enjoyable person to help you through this process. Where do you find mortgage broker candidates to interview? Ask around. Specifically ask other property owners if they used a mortgage broker that they could recommend. And I would also contact other real estate professionals: real estate brokers, escrow officers, and attorneys, to name just a few. Prepare several questions ahead of time including some of the following:
- What are your qualifications?
- How long have you been in business?
- How many lending sources do you generally work with?
- Can you give me the names and contact information for three property owners that have recently used your services?
Through the course of the interview determine, as best you can, whether you can trust him, whether he is competent and maybe most important whether he is likeable. Everything be equal you would rather do business with someone you like so determine whether they are likeable. Finish your interview with this question: “How are you different than your competition?”
There are several ways a mortgage broker can differentiate himself from his competition but I’ve got two ways that will help “separate the sheep from the goats.”
First of all ask him or her, “How do you go about comparing loan quotes?” A good mortgage broker will provide his clients a side-by-side comparison of the lender quotes he receives. A lazy one won’t do it because it requires more effort on his part than he’ll want to do. And you don’t want to hire lazy people. If you would like to see an example of a loan quote comparison that I’ve done for my clients go to my website: www.marshallcf.com. Go to the Mortgage Solutions tab and scroll down to the Mortgage Solutions Archive where you will see several loan quote comparisons to choose from. Click on one and you’ll see how much easier it is to compare loan quotes when they shown side by side.
A loan quote comparison will have at the top of the page the names of the lenders. Down the side of the page will be all the loan parameters a borrower needs to know in order to make an informed decision, such as loan amount, interest rate, loan term, amortization, loan fee, other financing costs, type of prepayment penalty, etc. to name just a few. Reviewing individual loan quotes can be confusing so a side-by-side comparison will help draw out the differences between each of the lender proposals making it much easier for you decide which loan is best for you.
Ask each mortgage broker to bring to the interview an example of what he provides his clients to compare loan quotes. If he does not show you some type of loan quote comparison spreadsheet, then I would suggest you not choose him as your mortgage broker. It’s that important.
Secondly, ask the interviewee whether they disclose to their client when they receive lender rebates? Many borrowers are unaware that some lenders pay rebates to mortgage brokers outside of closing. And the vast majority of mortgage brokers do not disclose to their clients that they’re receiving these rebates. As a result a borrower thinks he is being charged a 1.0% loan fee from the broker when in fact the lender is paying an additional fee to the mortgage broker of a half a point or more outside of escrow. In order to do this some lenders charge a higher interest rate to the borrower to compensate for the additional fee provided to the mortgage broker. So you, the borrower, without your knowledge maybe paying for the undisclosed loan fee through a higher interest rate. You want someone who is above reproach in this area. Choose a mortgage broker who discloses when and how much of a rebate he’s receiving from his lending sources and whether the rebate is increasing your interest rate.
My last bit of advice to you: Be loyal to the mortgage broker you choose. Once you’ve completed your interviews choose one and only one mortgage broker to represent you. Be loyal to your mortgage broker by using him exclusively. If you do, it will work to your advantage and here’s why:
When a borrower uses the services of more than one mortgage broker, without their knowledge, all trust between the borrower and the broker evaporates. And as I’ve said before, trust is everything in this business. For example let’s say you’ve decided to use Mortgage Broker A. If he calls one of his lending sources and discovers that Mortgage Broker B has already talked to them about your loan request, do you think Mortgage Broker A is going to work very hard getting you the best rates and terms possible? Not a chance. He’ll feel betrayed and rightly so. You’ve just shot yourself in the foot. Don’t do it!
And when a lender receives telephone calls from different mortgage brokers for the same property it’s a big “turn-off.” It signals to them that the property is being shopped to death. As a result they lose interest and put only a minimal effort into their loan quote. The best approach is to decide which mortgage broker you want to represent you and then stick with him to the get the best rates and terms possible.
There you have it – my suggestions on choosing a commercial mortgage broker, the questions to ask them in the interview process and how best to work with them once you’ve chosen who you want representing you. The last part in this e-book will briefly summarize the pros and cons of each option for getting the best possible loan for your property but you already know my recommendation.