A recent study conducted by the Center for Responsible Lending (CRL) examined the impact of working with a mortgage broker on the quality and cost of a home loan for borrowers with various credit ratings. The findings suggest that most American mortgage borrowers aren't sure where to get the best (i.e. least expensive) mortgage loans.
Luckily, the study also included suggestions for how to make sure you get the most bang for your buck. Before we pass those tips along to you, take a look at exactly how much money you stand to lose if you get a mortgage loan from the wrong source.
When taking out a home loan, you have two choices: go to a mortgage broker or work directly with a retail lender (like a bank or credit union). In theory, mortgage brokers work as middlemen, connecting lenders and borrowers to work out the best loans. In practice, though, the best loans for the mortgage broker may not be best for the borrowers.
And the authors of the CRL study dubbed mortgage brokers "the engine of the subprime market."
During the subprime boom, mortgage brokers often received bonuses for signing clients up for adjustable-rate loans, which are more expensive than traditional fixed-rate loans. In theory, ARMs were worth a lot on the secondary market because whoever bought them would receive serious money from borrowers' interest payments. In practice, though, many borrowers with ARMs defaulted when payments increased. This ended up costing investors serious money.
Naturally, when a broker can get a bonus from directing a lender toward an ARM, he's likely to do so. Here's a table from the study illustrating the cost (or savings) borrowers experienced when working with a mortgage broker as opposed to a retail lender. The data are from comparable loans originated from 2004-2006.
|Time In Loan|
|Market Segment||1 Year||4 Years||30 Years|
During the life of a loan, a subprime borrower would pay $35,874 more for a mortgage broker's loan than for one from a bank or credit union!
Note that prime borrowers actually save money when working with mortgage brokers.
If you don't have a top credit rating, you can expect to pay a little more for loans than those with prime credit. But you should still be able to find a manageable loan that won't lead to foreclosure or throw you into bankruptcy.
The CRL suggests following these guidelines when taking out a home loan:
Remember, a mortgage loan will likely be one of the biggest investments you ever make, so it's in your best interest to take the time to get the best deal possible. If you're still not sure how to proceed, it may be time to consider filing bankruptcy. By talking with a local bankruptcy lawyer, you can determine what options are available to you in your current financial situation and whether bankruptcy may help you meet your goals.
Simply fill out the form below or call 877-34-1309 to connect with a local bankruptcy lawyer for a free case evaluation.
PAID ATTORNEY ADVERTISEMENT: THIS WEB SITE IS A GROUP ADVERTISEMENT AND THE PARTICIPATING ATTORNEYS ARE INCLUDED BECAUSE THEY PAY AN ADVERTISING FEE. It is not a lawyer referral service or prepaid legal services plan. Total Bankruptcy is not a law firm. Your request for contact will be forwarded to the local lawyer who has paid to advertise in the ZIP code you provide. Total Bankruptcy does not endorse or recommend any lawyer or law firm who participates in the network nor does it analyze a person's legal situation when determining which participating lawyers receive a person's inquiry. It does not make any representation and has not made any judgment as to the qualifications, expertise or credentials of any participating lawyer. No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers. The information contained herein is not legal advice. Any information you submit to Total Bankruptcy does not create an attorney-client relationship and may not be protected by attorney-client privilege. Do not use the form to submit confidential, time-sensitive, or privileged information. All photos are of models and do not depict clients. All case evaluations are performed by participating attorneys. An attorney responsible for the content of this Site is Kevin W. Chern, Esq., licensed in Illinois with offices at 25 East Washington, Suite 400, Chicago, Illinois 60602. To see the attorney in your area who is responsible for this advertisement, please click here, or call 866-200-8052.
FLORIDA ONLY: Total Bankruptcy is considered a lawyer referral service in the state of Florida under the Florida Rules of Professional Conduct. By all other standards, Total Bankruptcy is a group advertisement and not a lawyer referral service.
If you live in Mississippi, Missouri, New York or Wyoming, please click here for additional information.
By an Act of Congress and the President of the United States, we are a federal Debt Relief Agency. Attorneys and/or law firms promoted through this Web site are also federally designated Debt Relief Agencies. They help people file for relief under the U.S. Bankruptcy Code. Disclosures Required Under the U.S. Bankruptcy Code.