1. What is a Mortgage Broker?
A Mortgage Broker acts as a middleman between you and potential lenders. The broker's job is to work on your behalf with several banks and wholesale lenders to find the mortgage lender that best fits your needs and has the most competitive terms. Mortgage Brokers have a well-developed stable list of lenders which they work with. This will make your life easier. Think of it this way, retail lenders have one interest rate, one outlet for your loan and one set of guidelines to follow. Brokers have multiples of these.
Mortgage Brokers are licensed and regulated financial professionals. They do a lot of the legwork - from gathering documents for you to pulling your credit history and verifying your income and employment - and use this information to craft a custom mortgage solution for you.
Once you settle on a loan and a lender that works best for you, your mortgage broker will collaborate with the lender's underwriting department, the closing agent (most likely a title company) and your real estate agent to keep your transaction running smoothly through closing day.
2. How does a Mortgage Broker get paid?
Mortgage Brokers are most often paid by lenders, sometimes by borrowers, but never by both. Mortgage Brokers lender-paid compensation plans pay brokers a set percentage of the loan amount. You can also choose to pay the broker yourself. That's called borrower-paid compensation.
Under Dodd-Frank legislation, brokers are not allowed to make more than 3% of the loan amount in discount points and fees.
3. What makes Mortgage Brokers different from bank or credit union loan officers?
Loan Officers that work for a bank or credit union oftentimes are paid a set salary and a small bonus or commission for writing loans for that lender. Most often these lenders maintain business hours and they don't work evenings or weekends.
Mortgage Brokers, who work within a brokerage firm, or independently, deal with many lenders and earn the bulk of their income from commission through lender-paid fees.
4. Is a Mortgage Broker right for me?
A Mortgage Broker can save you a lot of time and hassle by doing the loan shopping for you. No matter what type of lender you choose, broker, bank, online or otherwise - you want to pay close attention to the lender fees. Specifically, ask what fees will appear in Block A: "Orgination Charges" on your Loan Estimate.
4. How do I choose a Mortgage Broker?
The best way is to ask friends and family for a referral, but make sure that they or someone they know has actually used the broker and aren't just name dropping. Learn all you can about the broker's services, communication style, level of knowledge and approach to serving clients.
Another referral source: your real estate agent. Ask your agent who they work with and who they trust. Some real estate brokers have "in-house" mortgage lenders as a part of their suite of services. Be sure that you understand the affiliation and whether or not the in-house lender is a broker or a retail style lender. You are under no obligation to use an affiliated service provider.
Finally, be sure to check for customer testimonials and read your Mortgage Broker's online reviews.