The following is from "How to Save Thousands of Dollars on Your Home Mortgage" by my friend, Randy Johnson, and I have his permission to quote.If you're dealing with a broker, and you've settled on a program and made your application, ask him or her to reveal the source of funds for your program. If the lender is hesitant to do so, make this statement: "You are my agent, and I expect you to act in a fiduciary capacity. You owe me your loyalty, and perhaps you or your manager can explain how secrecy is consistent with that responsibility." You probably won't have any difficulty in getting this information if you've done all the preliminary work of finding a competent and honorable lender. You have a right to reasonable service in return for reasonable compensation.Once you've gotten past that issue, ask the next question, "May I see the rate sheet of the source you've selected for me, and may I have your commitment to show me the rate sheet on the day I lock in my rate?" If you get some resistance at this point, it will be because borrowers don't usually request this, but you have a right to know. Of course, it wouldn't hurt to reassure the broker by saying, "Look, I'm not going to go around you; I just want to know what the base rate is."With this information in hand, it's time to negotiate. Here's one good way to begin: "I know this isn't actually your rate, but the source's rate, which is non-negotiable. What is negotiable is what you make, whether points, commission, servicing-release premium, or yield-spread premium. What is your method of compensation?"Brokers aren't used to such questions. In fact, some may riposte, "What do you care what I make as long as you're happy with the rate?" The fact is that you want your broker to act as your agent, and an agent's compensation is disclosed to you as the principal. This isn't any different than the commission your real estate broker makes. So let's assume that the broker says, "Well, normally we make 2 points [over the source's base rate] on transactions like this." If you're applying for a $150,000 loan, 2 points is $3,000.Negotiation in this case means getting the broker to cut his or her commission. If you have an easy loan--meaning you have stable employment, are well-qualified, and have clean credtit--you have every reason to expect a better-than-average deal. You probably qualify for one of the automated loan underwriting systems (Fannie's Desktop Underwriter or Fannie's Loan Prospector), which allows your broker to get credit approval in less than an hour). This is usually the loan rep's decision because it's largely his or her commission you're negotiating, not the company's. You can say, "My loan is going to be one of the easiest you do this year, so you should charge me less. How about one and one-half points?" (That would save you $750.) First, the rep looks at you and thinks, "I've almost got this loan. I've pre-qualified them, all the paperwork is here and in order, they're happy with everything else, so the rest is going to be easy."Second, the rep will still make $1,500 out of the company's $2,250 commission. Third, he or she sees that you are a shrewd shopper and that the next lender you visit will probably agree to your proposal. The smart broker will agree to your terms and try to sign you up right away. When you come to an agreement, state, "When we have the final documents, I want confirmation that your compensation is what we have just agreed to." What you've just done is to make an agreement in advance with the provider of a service. If you can't get this assurance, perhaps you should reconsider your choice of lender. When it comes time to lock in your rate, be sure to ask the broker to fax or deliver the lender's wholesale rate sheet for that day.Note that probably only 5 percent of mortgage shoppers engage in this kind of negotiating, so most lenders will initially be taken aback. Stand your ground, and the good lenders will appreciate your professionalism and respect you for it.Catherine CoyMortgage BrokerThe only caveat I would add is that even if the broker provides you with the lender's rate sheet, you probably won't be able to read it because rate sheets are monstrously convoluted, but it never hurts to ask.
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