Are All Mortgage Brokers The Same?

Absolutely Not ! The traditional Mortgage Broker locates borrowers for Institutional Lenders. This would include Banks, Savings & Loans, Credit Unions, and Mortgage Companies like Prudential or Country Wide, and a host of others. These brokers primarily are able to help qualified buyers to buy homes and other properties. In our previous (and future hopefully) posts have discussed Private Loans, Notes, Trust Deeds, etc. In our last post we discussed whether you, as an investor who desired to make Private Loans or buy existing such loans, should use the services of a Mortgage Broker who specializes in these kinds of loans. Our recommendation was, and is, that unless you are a VERY experienced investor who has made these loans direct to private borrowers, that you consider using the services of a Mortgage Broker.

If you do decide to use a broker, we recommend you check the broker out. You should find out what types of borrowers they have been brokering loans to. How long they have been doing it, and ask for referrals of other investors, or maybe from Title Companies or Attorneys where they close their loans through. Also, have the broker walk you through a typical, and maybe some unusual, loans they have brokered.

Many of these same brokers can assist the investor who wants to buy existing Private Loans. These type of purchases usually can produce even greater yields, posibley as high as 14% – 16% or even higher. Remember high yields usually come with high risks. A good question investors should ask themselves is, “If I have to foreclose on the property that this loan is secured by, can I get my investment back?”

Be aware that some Private Money Mortgage Companies may be simply a front to raise funds for their own use to buy other mortgages or make loans. There is nothing wrong with this as long as full disclosure is made to the investor. A good question when dealing with a Mortgage Broker or company is, “Am I loaning this money to your company; some entity your company is connected to, or am I loaning it to a third party?”

These posts are the opinion of the author who is not engaged in rendering legal, accounting, or investment advice. If such advice is required or desired, the services of competent professional persons should be sought.