A mortgage broker is an independent real estate financing professional who specializes in the origination of residential and/or commercial mortgages. Mortgage brokers normally pass on the actual funding and servicing of loans to capital sources who act as loan "wholesalers." There are approximately 20,000 mortgage brokerage operations across the nation that originate more than half of all residential loans in the US.

A mortgage broker is also an independent contractor working, on average, with 40 wholesale lenders at any one time. By combining professional expertise with direct access to hundreds of loan products, a broker provides consumers the most efficient and cost-effective method of offering suitable financing options tailored to the consumer's specific financial goals.

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More than 50% of Americans do. Brokers provide consumers with:
- Choice
- Convenience
- Expertise

The consumer receives an expert mentor through the complex mortgage lending process. The broker offers the consumer extensive choices and access to affordable home loans while balancing the consumer's financial interests and goals.

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Yes! Homeownership is at an all-time high, due in large part to the increase of Mortgage Brokers nationwide. Mortgage brokers have access to and understand innovative loan packages that allow low- to moderate-income borrowers, those with less than perfect credit histories or difficult-to-prove income to start enjoying the benefits of home-ownership. They also shop for the most competitive rate for consumers without credit or income concerns, saving the borrower time and money.

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Neither. A broker is a real estate financing professional acting as an independent contractor. The range of products and services offered through brokers, and by brokers, is evolving rapidly. There are circumstances when brokers may act as bankers, funding their loans, however, the majority perform origination services up to the point of funding.

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Yes, absolutely. The safety and soundness of the mortgage lending community is directly linked to the success and integrity of its home loan originations. Furthermore, mortgage brokers represent the single largest residential origination source today, emphasizing that they play a significant role in the mortgage loan process. These numbers highlight the fact that consumers choose mortgage brokers because brokers are dedicated to their customers: consumers, wholesale lenders, and ultimately, American tax-payers.

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Brokers are regulated by several federal laws and regulations and dozens of state laws and licensing boards. KAMB supports reasonable and fair state/federal regulation of mortgage brokers and lenders.

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The wholesale lender underwrites and funds the home loan, may service the loan payments, and ensure the loans' compliance with underwriting guidelines. The broker, on the other hand, originates the loan. A detailed application process, financial and credit worthiness investigation, and extensive disclosure requirements must be completed in order for a wholesale lender to evaluate a consumer's home loan request. The broker simplifies this process for the borrower and wholesale lender, by conducting this research, counseling consumers on their loan package choices, and enabling them to select the right loan for their home buying needs.

The mortgage loan process can be arduous, costly, and seemingly impossible to the consumer. The broker works as the liaison between the borrower and the lender to create a cost effective and efficient loan process. Many low-income borrowers with less than perfect credit histories would not have been able to purchase their dream home without the assistance and dedication of a mortgage broker.

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Neither. As an independent contractor, the broker allows wholesaler lenders to cut origination costs by providing such services as preparing the borrower's loan package, loan application, funding process, and counseling the borrower. Brokers help keep loan rates low due to their minimal overhead and setup costs. Furthermore, the broker will seek the loan which best suits the borrower's financial circumstances, needs, and goals. From the consumer perspective, with rare exception, the broker does not get paid unless and until the loan closes. Thus, the broker has the ultimate incentive to provide the best possible customer service to the consumer.

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Since mortgage brokers offer the products of many wholesale lenders they often have the best selection. This question presumes that anyone can know what is "the best deal". While many would consider "the best deal" to mean "the lowest rate," a loan program with a very low interest rate may not be the best choice for a consumer with limited cash, if that rate comes with high points and fees. A 15-year loan may save a borrower tens of thousands of dollars in interest payments over a 30-year loan, but the higher monthly payments may not be acceptable to the consumer. So, "the best deal" for any consumer depends on his financial circumstances, needs, and goals.

Mortgage brokers originate today more than half the nation’s mortgages. This clearly indicates that consumers are choosing the superior options, service, and expertise offered by mortgage brokers. Brokers have forced retail lenders to compete with other loan sources driving down costs nationwide.

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The pre-approval process is much more complete than pre-qualification. For pre-qualification, the loan officer asks you a few questions and provides you with a pre-qual letter. Pre-approval includes all the steps of a full approval, except for the appraisal and title search. Pre-approval can put you in a better negotiating position, much like a cash buyer.

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Usually people refinance to save money, either by obtaining a lower interest rate or by reducing the term of the loan. Refinancing is also a way to convert an adjustable loan to a fixed loan or to consolidate debts. The decision to refinance can be difficult, since there are several reasons to refinance. However, if you are looking to save money, try this calculation:

1. Calculate the total cost of the refinance (do not include prepaid items such as homeowner’s insurance and real estate taxes.)
2. Calculate the monthly savings
3. Divide the total cost of the refinance (#1) by the monthly savings (#2). This is the "break even" time. If you own your home longer than this, you should save money by refinancing. Since refinancing is a complex topic, consult a KAMB mortgage broker who will help you determine further if refinancing is for you.

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Your KAMB loan officer will provide you with the necessary forms. A typical disclosure package will include the loan application, a good faith estimate, a truth-in-lending, an equal credit opportunity notice, a fair lending disclosure, a notice that you have the right to a copy of your appraisal, a mortgage loan origination disclosure, a flood insurance disclosure and a Kansas Notice to Consumers. If your loan will be have an adjustable rate or private mortgage insurance, you will also receive disclosures pertaining to each.

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A rate lock is a contractual agreement between the lender and buyer. There are four components to a rate lock: loan program, interest rate, points, and the length of the lock.

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Not necessarily. In fact, if you are a reasonably astute shopper, you will probably do better dealing with a mortgage broker. Mortgage brokers do not add any net cost to the lending process, because they perform functions that would otherwise have to be done by employees of the lender. Furthermore, because mortgage brokers deal with multiple lenders -- in a typical case, 35 to 40, sometimes more -- they can shop for the best terms available on any given day. In addition, they can find the lenders who specialize in various market niches that many other lenders avoid, such as loans to applicants with poor credit ratings, loans to borrowers who do not intend to occupy the property, loans with minimal or no down payment, and so on.

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Both income and assets are disclosed and verified, and income is used in determining the applicant's ability to repay the mortgage. Formal verification requires the borrower's employer to verify employment and the borrower's bank to verify deposits. Alternative documentation, designed to save time, accepts copies of the borrower's original bank statements, W-2s and paycheck stubs.

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Stated income/verified assets: Income is disclosed and the source of the income is verified, but the amount is not verified. Assets are verified, and may have to meet an adequacy standard such as, for example, 6 months of stated income and 2 months of expected monthly housing expense.

Stated income/stated assets: Both income and assets are disclosed but not verified. However, the source of the borrower's income is verified.

No ratio: Income is disclosed and verified but not used in qualifying the borrower. The standard rule that the borrower's debt-to-income ratio cannot exceed a certain percent is ignored. Assets are disclosed and verified.

No income/no assets: Neither income nor assets are disclosed.

Keep in mind that when choosing one of these loan options, you may be choosing a higher interest rate because there may be a greater risk to the lender.

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It is the list of settlement charges that the lender is obliged to provide the borrower within three business days of receiving the loan application.

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A loan eligible for purchase by the two major Federal agencies that buy mortgages, Fannie Mae and Freddie Mac. The loan limit for 2005 is $359,650 for a single family home.

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A mortgage larger than the maximum eligible for purchase by the two Federal agencies, Fannie Mae and Freddie Mac. For 2005, it will be a mortgage greater than $359,650.

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It is an upfront cash payment required by the lender as part of the charge for the loan, expressed as a percent of the loan amount; e.g., "2 points" means a charge equal to 2% of the loan balance. Points can be discount, origination or a combination of both.

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There’s more to owning a home than the personal satisfaction of being a homeowner, paying your own mortgage rather than someone else’s. You may be able to deduct the interest on your mortgage from your federal income taxes. You're also allowed to deduct the property taxes you pay as a homeowner. If you rent, you write your monthly check and it's gone forever. Another financial plus in owning a home is the possibility its value will go up through the years, building equity over time.

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RESPA stands for the Real Estate Settlement Procedures Act. RESPA covers conventional mortgage loans on one-to-four family properties, as well as government insured and guaranteed loans. It requires lenders to provide borrowers with certain settlement cost and loan information throughout the loan process (i.e., the Good Faith Estimate, Settlement Cost Booklet, HUD-1). RESPA also sets forth certain requirements for loan servicing and escrow accounts. The statute further protects borrowers by prohibiting kickbacks and referral fees, which may increase costs in the settlement process. Further information can be found on HUD’s web site at http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm. You may also call HUD’s Customer Service Center for a copy of the helpful brochure 'Buying Your Home.' The number is 1-800-767-7468.

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Frequently, the first person you consult about buying a home is a real estate agent or broker. Although real estate brokers provide helpful advice on many aspects of home buying, they may serve the interests of the seller, and not your interests as the buyer. The most common practice is for the seller to hire the broker to find someone who will be willing to buy the home on terms and conditions that are acceptable to the seller. Therefore, the real estate broker you are dealing with may also represent the seller. However, you can hire your own real estate broker, known as a buyer’s broker, to represent your interests. Also, in some states, agents and brokers are allowed to represent both buyer and seller.

Even if the real estate broker represents the seller, state real estate licensing laws usually require that the broker treat you fairly. If you have any questions concerning the behavior of an agent or broker, you should contact your State’s Real Estate Commission or licensing department.

Sometimes, the real estate broker will offer to help you obtain a mortgage loan. He or she may also recommend that you deal with a particular lender, title company, or settlement/closing agent. You are not required to follow the real estate broker’s recommendation. You should compare the costs and services offered by other providers with those recommended by the real estate broker.

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Appraisals are prepared for lenders; home inspections are for you, the buyer. Home inspections give you detailed information on the physical condition of your new home. For more information and a helpful brochure on home inspection call 1-800-217-6970.

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A credit score is a determined scientific number from 300-850, which indicates the level of risk for repayment of debt to a lender at the time of the credit inquiry. Credit scores are based on your current debt utilization, your payment history including mortgages, credit cards, auto loans and bankruptcy filings, any other public record, how long your credit has been established and a mix of credit types you are using. The number of inquiries about your credit during the last 12 months may or may not be a factor influencing your credit score, depending on all the other factors present in your credit file at the time of the inquiry.

The Kansas Association of Mortgage Brokers (KAMB) recommends that consumers meet with a certified mortgage professional to discuss how to improve their credit score and profile. Follow these tips to improve your credit score:

- All credit card balances should be paid to below 30% of the available credit limit on the card.

- Do not consolidate credit card accounts to one or two cards and close out other accounts.

- Consolidation of your credit card balances will noticeably distort the appearance of your credit utilization. Having a low balance on several credit cards is better than having a high balance on one or two cards where exceeding more than 30% of your available credit limit would indicate you were a higher credit risk profile.

- Keep your credit card accounts open and active by using your cards at least once every 5 months, even if it is for a tank of gas. When you receive the bill for a credit card you do not use that often, make sure to pay the bill in full. Do not close accounts without the advice of a knowledgeable mortgage broker, as doing so may negatively impact the balance of the variables weighed by the scoring model in assessing your risk profile and credit score.

- Review your credit report for accuracy at least 90-days before applying for a mortgage. Have any inaccuracies reported and have outdated information in your credit file modified by that specific repository by sending them a written dispute requesting the item be reinvestigated and verified as to its accuracy. You may want to ask your mortgage broker how you go about filing a written dispute with the appropriate repository.

- Have clear and concise documentation to support your claim about why you are filing a dispute request and mail that documentation to the reporting repository with a return receipt requested. The Fair Credit Reporting Act states that the process to make necessary modifications will take approximately 30 days. Individuals who wish to obtain their credit scores and profiles can do so by contacting Equifax, Experian or TransUnion at their respective websites. Consumers, however, must be aware that there may be a fee for the report, unless they have been declined for a credit request based on a repository’s information listed on their credit report.

- Paying off a collection account or judgment will not eliminate it from your credit file. Paid or satisfied negative credit items will show a zero balance, but will not disappear from your credit file for a seven-year period from the occurrence of the negative item. A late or collection account will still be reflected in your credit file even if it has been paid off recently, as it was late or did go to collection therefore it is accurately reported.

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Example is for a 30-year fixed rate conventional mortgage at $125,000 with 20% down payment for a purchase.

Appraisal: $250-350
Final Inspection: $50-100
Credit Report: $5-25
Lender’s Charges: $350-$675, may be called underwriting, processing, or administrative fee
Mortgage Broker Fee: May range from nothing, to a flat fee, to a percent of your loan amount.
Closing Fee: $175-$250
Title Insurance: $175-$250*
Recording Fees: $75-$125
Mortgage Registration Tax: .0026 x loan amount
Survey: $150-$250
Wire Fees: $15-$25
Courier Fees: $15-$25

On a refinance, title insurance is based on the loan amount and will typically be higher than during a purchase. Surveys and final inspections are typically only required on the purchase of new construction.

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One of the purposes of RESPA is to help consumers become better shoppers for settlement services. RESPA requires that borrowers receive disclosures at various times. Some disclosures spell out the costs associated with the settlement; outline lender servicing and escrow account practices and describe business relationships between settlement service providers.

Affiliated Business Arrangements
Sometimes, several businesses that offer settlement services are owned or controlled by a common corporate parent. These businesses are known as 'affiliates.' When a lender, real estate broker, or other participant in your settlement refers you to an affiliate for a settlement service (such as when a real estate broker refers you to a mortgage broker affiliate), RESPA requires the referring party to give you an Affiliated Business Arrangement Disclosure. This form will remind you that you are generally not required, with certain exceptions, to use the affiliate and are free to shop for other providers.

Escrow Account Operation & Disclosures
Your lender may require you to establish an escrow or impound account to insure that your taxes and insurance premiums are paid on time. If so, you will probably have to pay an initial amount at the settlement to start the account and an additional amount with each month's regular payment. Your escrow account payments may include a 'cushion' or an extra amount to ensure that the lender has enough money to make the payments when due. RESPA limits the amount of the cushion to a maximum of two months of escrow payments.

At the settlement or within the next 45 days, the person servicing your loan must give you an initial escrow account statement. That form will show all of the payments which are expected to be deposited into the escrow account and all of the disbursements which are expected to be made from the escrow account during the year ahead. Your lender or servicer will review the escrow account annually and send you a disclosure each year, which shows the prior year’s activity, and any adjustments necessary in the escrow payments that you will make in the forthcoming year.

Good Faith Estimate of Settlement Costs
RESPA requires that, when you apply for a loan, the lender or mortgage broker give you a Good Faith Estimate of settlement service charges you will likely have to pay. If you do not get this Good Faith Estimate when you apply, the lender or mortgage broker must mail or deliver it to you within the next three business days.

Be aware that the amounts listed on the Good Faith Estimate are only estimates. Actual costs may vary. Changing market conditions can affect prices. Remember that the lender's estimate is not a guarantee. Keep your Good Faith Estimate so you can compare it with the final settlement costs and ask the lender questions about any changes.

HUD-1 Settlement Statement
One business day before the settlement, you have the right to inspect the HUD-1 Settlement Statement. This statement itemizes the services provided to you and the fees charged to you. This form is filled out by the settlement agent who will conduct the settlement. Be sure you have the name, address, and telephone number of the settlement agent if you wish to inspect this form. The fully completed HUD-1 Settlement Statement generally must be delivered or mailed to you at or before the settlement. In cases where there is no settlement meeting, the escrow agent will mail you the HUD-1 after settlement, and you have no right to inspect it one day before settlement.

Servicing Disclosure Statement
RESPA requires the lender or mortgage broker to tell you in writing, when you apply for a loan or within the next three business days, whether it expects that someone else will be servicing your loan (collecting your payments).

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