Mortgage brokerage contracts protect home buyers from fraud. When buying a home, most people don`t pay in cash. Instead, they finance the majority of the real estate purchase with a mortgage. You can choose to go directly to a bank or mortgage lender to get a mortgage, or use a mortgage broker to buy interest rates and loan products. To prevent fraud, states require mortgage brokers to enter into mortgage agreements, generally referred to as mortgage brokerage contracts, before accepting fees. Many people contact a specific lender directly to get a loan. B for example Wells Fargo Home Mortgage or SunTrust Mortgage. However, other potential home buyers use mortgage brokers – independent contractors who work alone or for a mortgage brokerage firm who represent loan products for different lenders in order to get the best deal for their clients. Mortgage brokers point to many of the loans offered by large mortgage lenders. For example, Wells Fargo delivered more than 20% of residential mortgages to the U.S.
in the second quarter of 2013, although much of that percentage comes from mortgage broker referrals. Anyone who uses a mortgage to buy a home has to go through the loan process. This involves finding the loan product that matches the home buyer`s credit and equity profile with their needs. The lender charges a subscription fee – also known as an administration fee, subscription fee or processing fee – to assess and prepare the mortgage. Origination fees may cover the preparation of documents, attorneys` fees for the lender, notary fees and similar related costs. Legally, anyone who uses a mortgage broker instead of a direct lender to purchase a home must enter into a fully signed mortgage brokerage agreement before the broker can assess the issuance fee. State laws prohibit a potential buyer from paying issuance fees to mortgage brokers unless there is a written mortgage broker agreement between the two parties. The brokerage contract must be signed and dated by the home buyer and the mortgage broker or branch manager if the broker works for a mortgage brokerage firm.
The written brokerage agreement must clearly state the services provided by the mortgage broker, the terms of the loan fee and the dollar amount that the mortgage broker must receive as a loan fee. In most states, a mortgage broker can only charge application fees and third-party fees — reviews, surveys, credit reports — before approving a home loan by a qualified lender. If the mortgage broker receives a commission or incentive from the lender in addition to the issuance fee, the mortgage brokerage contract must clearly indicate that remuneration, amount and purpose. Tiffany C. Wright has been writing since 2007. She is an entrepreneur, interim CEO and author of “Solving the Capital Equation: Financing Solutions for Small Businesses.” Wright has helped companies raise more than $31 million in financing. She holds a master`s degree in finance and entrepreneurial management from the Wharton School at the University of Pennsylvania. .