Ten Point Checklist To Help You Pick The Right Mortgage Broker

By FutureNestEgg | July 17, 2008

When financing your home you can either go straight to the lender or go to the lender through a mortgage broker. If you are planning to go through a mortgage broker, here is a checklist that can help you pick the right mortgage broker:

1. Accreditation And Qualifications: The mortgage broker has to be a member of Mortgage and Finance Association of Australia (MFAA). This is the peak industry body for all mortgage and finance brokers. Here is why you should pick a MFAA member ( a direct quote from their website):

“MFAA members must adhere to the industry Code of Practice which required high professional standards, fair business practices, ethical behaviour and compliance with both the letter and the spirit of the relevant laws and regulations – all in the interest of you, the borrower.”

Visit MFAA website and use their online database facility to make sure that your broker is accredited with MFAA.

You also have the right to ask for proof of their professional qualifications or their experience in the industry.

2. Reference: You can ask for references from their previous clients.

3. Lenders On The List: The larger the number of lenders your broker deals with, higher the variety and hence higher the chances of you finding a loan suitable to your needs. Make sure your broker deals with a few different types of lenders (banks, non-banks, credit unions, building societies etc). Also check if the broker himself is a lender…If they are make sure they are not biased towards their own loans.

4. Brokers Commission: Find out how the broker gets paid. Find out how much the lenders in his books will pay the broker – You need this information to make sure that the broker’s recommendation is not influenced by the payout.

5. Fees You Need To Pay: All the brokers receive commission from the lender they recommend. In addition to this commission some brokers might charge you fees. If your broker is charging you fees, find out what this fee is for.

6. Methodology Used To Pick The Loan: Some brokers use software to select the right loan and some might use the old fashioned method to pick the loan. Whatever the method they use, you need to understand why the broker is recommending a particular loan. Don’t just accept his decision – ask and understand why the loan was picked from the pool of available loans.

7. Insurance: Check if the broker has professional indemnity insurance. They must have this insurance. Tomorrow for some reason if you do decide to sue them, this insurance will cover any payments that they might have to offer you (as a result of the law suit).

8. Professionalism: The mortgage broker should be approachable and should always act in your best interests. If they say they are ‘acting in your interests’, don’t just take their word for it – be cautious and make your own judgments. The broker should tell you in advance how long it would take for the loan to be processed.

The broker should not encourage you to borrow beyond your means. The fact is, you can go straight to the lender but if your are choosing to go through a mortgage broker then make sure that the broker is offering you something special.

9. Loan Features: Understand the various features offered by the loans, the fees and charges associated with the loan.

10. Privacy Guidelines: Find out what the brokers’ privacy guidelines are – you don’t want your broker selling or sharing your financial information with others (other than with the lender you choose).