I figured it would be very imformative if everybody would post how people get ripped off in their line of business.
I'll start. I'm a mortgage broker.
The most obvious way I could rip you off is simply by charging more fees to do your loan than are actually necessary. We are allowed to charge as little as we want, but no more than 5 points on a loan (5%).
Of course I'm always going to shoot high. All you would have to do is ask your broker how many points he's charging you. If he says anything more than 1 pt, tell him you're shopping around and you'll get back to him. At that point, you can either actually shop around, or come back to your broker and tell him you'll do the loan through him, but only if he drops his fee to 1 point.
The loan amount shouldn't really factor into the broker fee, but it almost always does.
If it's anything over 250k, tell the broker you'll do a loan through him only if he charges $2,500. Just because you're refinancing $700,000 doesn't mean your broker is doing any extra work compared to a $150,000 loan. The larger loan amount only makes the fee appear more reasonable.
That is on the front end.
We also make money on the back end of loans, which is called "yield spread premium".
YSP explained in depth, Wiki
In short, if you qualify for a rate of 6%, but your broker signs you up at 6.5%, they get paid yield spread for getting you to take the higher rate. The lender makes more over the life of the loan, so the broker gets a cut of that.
I hate to say it [img]/images/graemlins/grin.gif[/img], but you really should be shopping around to a few different brokers unless you're dealing with somebody you absolutely trust.
In many cases, it's beneficial for the borrower to roll the closing costs into the broker's fee, which is tax deductible. Any broker can do this, and many will offer, but you should bring it up yourself if they don't.
There is no such thing as a "no closing cost" loan. It's just an attractive way of saying, "we will roll your closing costs into our fees."
Lastly, when you have been sent the GFE (Good Faith Estimate), call your broker back and tell them it's a deal if they waive (x) fee. There is usually an admin fee around $350, and a processing fee of ~$600. These are part of your closing costs, but they can actually be waived without rolling them into the broker fees, as opposed to the underwriting fee.
Just tell them, "If you waive this fee of $600, I'll sign these papers right now and fax them to you."
If you're dealing with a big corporation, they might not waive it. Smaller companies would never lose a deal over a $600 fee.
Brokers, feel free to add to this if you see fit. Or flame me for writing all this, meh.
All,
Please help out the 2+2 community by telling us how to not get ripped off purchasing products in your line of work.