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- A mortgage broker takes care of a lot of the research that comes with buying a home.
- Some lenders work exclusively with mortgage brokers, and brokers can find you lower rates.
- A mortgage broker may be compensated by the lender, or you might have to pay them.
Finding the best mortgage lender for your situation can be a tedious, time-consuming, and stressful process. To ensure you choose the best one for your needs and get the best deal, you'll want to do a lot of shopping around and comparing rates. You'll probably even need to apply with multiple lenders just to get a sense of what's available to you.
A mortgage broker's job is to do all that research and hard work for you.
Understanding the role of a mortgage broker
A mortgage broker isn't the same thing as a mortgage lender — or even a loan officer — but they can help you with financing your home purchase. Here's what you need to know about these pros.
Definition and overview
A mortgage broker is a personal shopper of sorts — only for mortgage loans. They act as an intermediary between you and various lenders, helping you apply, compare loan products, and choose the best loan option among them.
They typically have access to many loan products and lenders all at once and can shop around between them on your behalf.
How mortgage brokers operate
A mortgage broker acts as a sort of middleman between you and a mortgage lender. Brokers don't lend you the money themselves. Instead, they do the work of comparing different lenders for you, helping you apply for your loan and choose the offer that best suits your needs. They also make sure everything is in line for you to close on time and communicate with you throughout the loan process.
Benefits of using a mortgage broker
A mortgage broker can be a big help during the mortgage shopping process. Here are just a few of the advantages of mortgage brokers:.
Access to multiple lenders
A mortgage broker typically has access to more lenders than you do on your own — including some that only do business through mortgage brokers. This can often lead to lower interest rates and fees and better terms when using a broker.
Expertise and knowledge
The benefit of having someone do all the hard work for you is that you don't have to be an expert in underwriting or understand the nitty gritty differences between lenders. Granted, it's always a good idea to learn as much as possible about what you're getting yourself into, but a mortgage broker can help you wrap your head around everything.
Time and stress savings
You'll probably save time when using a mortgage broker. When you have a mortgage broker, you don't have to spend time researching low rates, minimum credit scores to buy a house, and fees — they do all that for you.
How to choose the right mortgage broker
How do you find a trustworthy broker who will find you the best deal? These tips can help you choose a mortgage broker.
Key qualities to look for
A good mortgage broker is trustworthy, well-connected, honest, and good at communicating. They will get to know you personally and ensure they're offering you guidance and loan options that mean your individual needs and budget — not just ones that will net them the highest commissions.
Checking credentials and reviews
The best option is to ask for references from people you trust. Ask family members and friends who have bought homes whether they used a mortgage broker. If they have, would they recommend the broker they worked with?
You can also check review websites such Yelp or Google Reviews to find local brokers and read customer reviews.
Questions to ask potential brokers
Find a few mortgage brokers who spark your interest and interview each broker before making your decision. Ask the brokers about their certification and experience, their costs, and how the process of buying or refinancing a home will work with them. You should also ask about what lenders and loan products they have access to — especially if you're worried about qualifying for a loan.
Mortgage broker vs. loan officer
Mortgage brokers and loan officers do similar jobs, but they're not exactly the same. See below for how these two professionals different.
Differences in role and function
The key difference between loan officers and mortgage brokers lies in who they work for and the products they can offer.
While loan officers work for individual lenders and can only offer you loans that the lender they work for offers, brokers can help connect you to a variety of types of mortgage loans from many different lenders. They're not employed by any single company and can instead help you shop amongst several lenders and loan products at once.
Pros and cons of each
Loan officers can be helpful if you know the lender you want to use. In this scenario, they could help you zero in on the best loan product offered by their employer, and walk you through the application and closing process for it.
Brokers, on the other hand, are a good fit if you're not sure what you need or you want to be sure and compare several options or rates. It can also be helpful if you're looking for a more unique loan program, are self-employed, or you're worried about qualifying. A broker could then help you find a lender that offers a loan product that fits your needs.
Costs and fees associated with mortgage brokers
As with any professional, mortgage brokers get paid for their services. Here's what that typically looks like.
How mortgage brokers get paid
Mortgage brokers are usually paid commission on the loans they help close. Usually, the lender is the one who pays the broker, but sometimes the borrower is the one to pay. It all depends on your broker and their fee structures. You'll want to discuss pay upfront if you plan to use these services.
Understanding mortgage broker fees
There's no hard-and-fast number, but many mortgage brokers get paid 1 to 2% of the loan amount, though it varies by the professional and lender involved. According to jobs platform Indeed, the average mortgage broker earns about $93,000 per year.
Common myths about mortgage brokers
There are several myths that surround mortgage brokers, but fortunately, those are just that: untrue myths. See below as we debunk them:
Myth: mortgage brokers are expensive
The majority of mortgage brokers get paid by the lenders they close loans with. Most buyers won't pay out of pocket for a mortgage broker's services, and if they do, that fee should be disclosed upfront, long before it comes due.
Myth: mortgage brokers are unnecessary
While you could certainly apply for your loan and shop around among lenders on your own, it can be time-consuming and tedious — and you may not even know the best lenders for your situation.
Mortgage brokers can assist in the process and take much of the load off your shoulders. They can also help you pinpoint loan programs that can meet your specific needs (maybe you need a loan for low credit scores or one with no down payment requirement, for example).
FAQs on mortgage brokers
A mortgage broker is a professional who acts as an intermediary between borrowers and lenders.
Mortgage brokers typically get paid through commissions from lenders or, sometimes, fees from borrowers.
For many borrowers, it can be worth it. Mortgage brokers can provide access to multiple loan options and expert advice.
Yes, mortgage brokers charge fees, which can vary based on the broker and the loan. These are typically paid by the lender.
A mortgage broker helps you shop around and compare loan options from several lenders. They can help you find the best deal and loan for your needs.
