Mortgage brokers: You don’t need one to find the best deal

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You can search for a great home loan on your own, or you can hire someone to find one for you.

That's what mortgage brokers do. They're middlemen who represent small to mid-size lenders and make a commission on each loan they sell.

Although studies say seven or eight out of every 10 home buyers use brokers, Business Week magazine recently criticized them as a "commission-hungry...and unregulated sales force for banks, untethered to the financial health of the buyers."

They're often paid the biggest commissions for selling the most costly and dangerous kinds of loans, such as option ARMS and aggressively push those loans without explaining how they work and the risks they entail.

Given how easy the Internet has made mortgage shopping, we think most home buyers can find a safe fixed-rate or adjustable-rate loan without a broker.

Mortage rate comparison charts such as ours allow you to compare rates and fees from scores of lenders, big and small.

There's nothing wrong with asking a mortgage broker if he can beat the deal you found online, but don't be surprised if the answer is "no."

Mortgage brokers can only guarantee you'll get the lowest possible rate from the four or five lenders they work with.

Brokers would point out that price isn't the only thing when buying a mortgage. And they're right.

Everyone wants a simple, convenient application and approval process without any last-minute surprises.

Virtually every lender you'll find on-line, and contact by phone or e-mail, would claim they've made their application process easy and consumer friendly.

But brokers argue that this is where they excel, guiding their customers through every aspect of the mortgage process, from pre-approval through a seamless closing.

That service might make some sense for buyers who want a loan with as little fuss, bother, or involvement as possible.

But it makes the most sense for buyers with less than stellar credit.

If you have a credit score of 590 to 640, you're on the bubble for qualifying for a loan from a mainstream lender, even at a rate higher than those they advertise for good credit risks.

Just because one bank turns you down, and refers your application to their subprime subsidiary that specializes in loans to high-risk borrowers, doesn't mean every mainstream lender will do the same.

But once you've turned to a subprime lender you'll pay their much high rates perhaps twice as high as a borrower with good credit.

A mortgage broker who has a long working relationship with prime and subprime lenders may be in the best position to know whether you can qualify for a loan from a mainstream lender that costs somewhere between good-credit rates and subprime rates.

If you decide to do that, just be sure to contact at least three mortgage brokers to not only find the best deal, but a broker you're comfortable dealing with.

There have been numerous cases of unscrupulous brokers taking advantage of borrowers with poor credit. So be sure and get recommendations from friends and family members who have used mortgage brokers.

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