Working With A Mortgage Broker

1. What is a mortgage broker?

Think of a mortgage broker as a middleman between you and potential lenders. The broker’s job is to work on your behalf with several banks to find the loan with the most competitive terms and lowest rate that best fits your needs. People often use “mortgage broker” and “loan officer” interchangeably but they aren’t the same. (We’ll explain later.)

In general, mortgage brokers are licensed and regulated financial professionals who have a well-developed stable of lenders they work with. They do all the legwork — from gathering documents from you to pulling your credit history and verifying your income and employment — and use the information to apply for loans on your behalf with several lenders in a short time frame.

Once you settle on a loan and a lender that works best for you, your mortgage broker will collaborate with the bank’s underwriting department, the closing agent (usually the title company), and your real estate agent to keep the transaction running smoothly through closing day.

2. How does a mortgage broker get paid?

Like most sales professionals, mortgage brokers charge a commission for their services. They typically charge a “loan origination fee,” which is about 1% of the loan amount and is paid by the borrower at closing. Sometimes, though, mortgage brokers negotiate no-cost loans so you don’t have to shell out extra money up front; the broker will instead be paid by the lender after the loan closes. However, choosing a no-cost loan to minimize your out-of-pocket expenses means you’ll pay a higher interest rate, which costs more over time.

So what makes loan officers different from mortgage brokers? Loan officers are employees of a lender and are paid a set salary (plus bonuses) for writing loans for that lender. Mortgage brokers, who work within a mortgage brokerage firm or independently, deal with many lenders and earn the bulk of their money via commissions. The larger the loan amount, the higher the broker’s commission will be.

3. What are the benefits of using a mortgage broker?

For starters, a mortgage broker acts as your personal loan concierge and does all the work for you. The broker applies for loans with different lenders on your behalf, finds the lowest rates, negotiates terms and makes the approval magic happen.

Most mortgage brokers have relationships with several local, regional and even national lenders, and they can tap those connections to get some loan fees waived for you. A mortgage broker will give you accessibility and one-on-one attention you likely won’t find when working directly with a loan officer at a large bank.

Another perk: Some banks and lenders work exclusively with brokers, and that positions you to get qualified for certain loan products if your mortgage broker has a good relationship with those lenders.

You’ll also save time by using a mortgage broker; it can take hours to apply for different loans, and then there’s the back-and-forth communication involved in underwriting the loan and ensuring the transaction stays on track. A mortgage broker can save you the hassle of managing all those daunting details.

To learn more go to: