Next Property, Using a Mortgage Broker This Time

by Mr. Cheap

People joke that real estate investing is like a drug, once you start you want more and more. Its somewhat true (and can be a good comparison, as you can ruin your life going crazy on drugs or real estate investing).

My original idea is that I’d follow my buddy’s example and try to get 1 property per year. Since I closed on my first property last December, I still have 7 more months, but I’ve definitely been keeping my eyes open.

I always worry about getting approved for mortgages / lines-of-credit because I’m not a salaried employee. The banks can be difficult if you don’t fit into their cookie-cutter process (basically my income was super low the last few years as I was at school then trying, and failing, to start a business). I’m earning good income now, but its contract work.

Finally I figured it’d make sense to check in with a mortgage broker (like people are always suggesting) and see if they’re better then the bureaucrats I’ve dealt with at the banks so far. Wow, what a difference!

Once I told her my stellar credit rating and that I had claimed business expense over the past few years, all the problems went away. I’ve been approved for pretty well any property I might want to buy (I’m not going to go nuts and get a mansion) from 5-20% down, with rates comparable to what regular people get. Nice!

It always amazes me when organizations throw money away because they’re unable to smooth out their own inefficiencies. Basically they’re paying mortgage brokers big bucks to help them accept clients that they would have rejected if approached directly. Too weird! I had the same experience trying to get insurance, ING Direct wouldn’t insure me, and then I got insurance through a broker, and it was (yup!) ING Direct!

If you’re at all unusual and have had trouble getting a reasonable deal from the banks, I’d definitely talk to a mortgage broker! Just make sure you’re getting a rate that’s a good discount compared to those posted at the big-banks (unless you have crappy credit or no down payment).

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{ 5 comments… read them below or add one }

1 Anonymous

Exactly! Go figure, it must make sense to someone

2

I used a broker a month ago to get my new mortgage. I really don’t understand why I can’t go to my bank and tell them that I’m shopping around and have a mortgage broker and get the best rate. Instead I go to the mortgage broker, they get paid a fee from the bank (sometimes the same bank) and they get the best rate. I understand the bank doesn’t want to give out the best rate just for walking in the door but in my case they could have saved themselves a MB fee and kept my mortgage if they had negotiated properly.

Mike

3

Interesting point about brokers vs. banks.

I wonder if the banks get some type of protection or help if you default on your mortgage and you went through a broker to access their money. Are the brokers responsible in some way that would give the bank incentive to use them for higher risk client.

Either way brokers rule, and I used one for my mortgage.

4 Anonymous

Well, if you got the best rate that’s the important thing… Very odd behaviour on the bank’s part. I’ve heard of some banks ENCOURAGING customers to go to mortgage brokers (figure that one out).

5

We had a mortgage broker when we bought our house (I was employed for a company at the time), and the broker indirectly helped us get a better rate. My bank had previously refused to deal with us because we were under a tight timeline (can’t figure that one out) so we went to a broker. However, as soon as the bank got wind that we had a broker and were going to get a mortgage without them, they started offering us a better deal than the broker could. I talked with the broker about it because I felt badly about the whole situation, but had to go with the best rate- which in the end was the banks! The broker said the situation was not uncommon- that banks HATE brokers and often will pull stunts like that. Unfortunately we were caught in the middle and the situation still feels a little wrong to me.

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