How to Know If My Mortgage Broker Is Legitimate?

A qualified loan broker has a personal resume showing college-level classes in real estate, lending and mortgage practices. A broker with a bachelor's degree is better, and a master's in a real estate-related field tops that qualification. Special certifications in brokerage areas also show legitimacy. A resume showing years of successful lending experience also signals a qualified broker. A legitimate loan representative should hold an active state license and current membership in at least one or two professional business organizations, including the Association of Mortgage Professionals and the state branch of this organization. If your broker can't produce a current, valid license issued by your state, walk away.

An independent loan broker should also have a valid state license to do business. If your broker works in a brokerage office, the firm must have a current a state business license. The business license means your broker has a state-required bond backing up his performance. Ask to see the business licenses before signing any contracts. A brokerage firm should feature the company license -- look for framed wall certificates on the office walls.

Ask your friends, family members and business associates to recommend a mortgage broker. A completed loan with a happy customer is an excellent recommendation, but dig deeper to find out the terms of the loan. Some borrowers feel satisfied with a loan based on the broker's ability to schmooze -- when the actual loan rates were less than stellar. If possible, chat with the people making recommendations about the details of the loans. Look for mortgages coming in on time during escrow and with the rates and conditions the buyer looked for when shopping for a loan. If anyone bemoans changing loans mid-escrow -- sometimes a sign of a bait-and-switch lender scam -- move on to another broker recommendation. Great loan terms separate a high-quality broker from those bringing in any old loan.

Don't assume your broker is legitimate simply because he is still doing business. Investigate pending lawsuits and complaints with your local real-estate board and area business bureaus. If your broker is new to your area, take time to call these offices in your broker's former home area. If your broker has several complaints by former clients, find a new broker.

Mortgage brokers must meet state laws in offering services. The Better Business Bureau warns against using brokers promising guaranteed loans, collecting up-front money before providing any services, verbal offers of loans and collecting checks made out personally to the broker, rather than a bank or registered lender. All are signs your broker is not legitimate.