Starting January 1, 2009, mortgage brokers who originate residential mortgage loans in the state of Colorado will need to be licensed in the State of Colorado. To obtain a Colorado Mortgage Broker License, the individual must: pass a criminal background check, carry E&O insurance, be bonded, complete educational courses and pass a 2 part state & federal examination. Always ask the mortgage broker if they are licensed and then check them out at the Colorado Division of Real Estate.
More info at: http://www.dora.state.co.us/real-estate/mortgagebrokerregistration.htm
The BBB recommends the following when evaluating a mortgage company or its advertising:
-Conduct research on current interest rates: Inquire on the advertised rates and understand if they are adjustable rate programs (ARMs) or Fixed rate programs. ARMs may cause your monthly payment to fluctuate within a given period of time.
-Understand the charges (Points & Fees): Most borrowers can expect to pay a 1% origination fee (1 point) and as well as other standard closing costs, which would include appraisal, title, lender and processing fees. Clarify and compare all fees before proceeding, and consult a third party if you are not comfortable with the broker's answers.
-Get the details (No Cost Loans): No cost loans are generally higher interest rate loans. The interest rate is increased and the lender pays the broker additional money that can be used to cover the closing costs of the loan. Make sure that you evaluate the "breakeven point" of the loan, meaning, how long will you be staying in the loan vs. the cost of the increased interest rate that covered the fees of the loan.
-Do you have the Right to Rescind?: With a refinance loan on a primary residence you have a three day rescission period after the closing to review your closing documents and to decide if you wish to keep the loan or turn it down. On a Purchase loan or a refinance on a 2nd home there is not a recession period, so make sure you take the appropriate time necessary to evaluate your documents before signing.
-Be wary of predatory loans: Extremely high interest rates, excessive fees, pre-payment penalties not meeting regulations and "Patch or short term fix hard money loans".
-Ask for the required disclosures: A licensed Mortgage broker is required by state and federal regulations to provide disclosures containing: terms, conditions, costs/fees, annual percentage rate, net tangible benefit, rate lock-in, equal credit, equal housing and others within a specified timeframe. Take the time to understand what you are signing up for.
Choosing a Lender:
- Invest the time to understand the factors that affect your ability to obtain the best interest rate and loan type possible for your situation. Credit scores, equity position of your home and ability to maintain a monthly payment. Consider that the parameters are ever changing and different with each borrower and lender.
To get a free copy of your credit report annually you can call 1-877-322-8228 or visit this web site: www.annualcreditreport.com
To get answers to mortgage-related questions, call the Colorado Mortgage Lenders Association on their help line at 1-800-611-4832 OR 303-773-9565.