What Does a Mortgage Broker Do?
A mortgage broker acts as an intermediary between lenders and borrowers seeking mortgage loans. They do not use their own funds to originate or fund mortgages, but instead earn commission from both parties after the loan closes.
Mortgage brokers advise borrowers on available loans, provide pre-approval and evaluate their financial information to find the most advantageous home loan. Furthermore, they collect documents from borrowers and forward them on to potential lenders for processing and approval.
How Does a Mortgage Broker Make Money?
Most mortgage brokers generate their income from fees and commission, which is usually paid by the lender but may occasionally be added onto the loan amount itself.
Fees for loan brokers vary depending on the type of loan a borrower applies for, with some costing up to 2% of the principal as commission. Furthermore, mortgage lenders often charge origination fees which could add significantly to your total loan amount.
Mortgage Brokers Help You Avoid Big Mistakes
A mortgage broker can save you a lot of time and grief by helping determine the most advantageous options for your individual situation. For instance, if you are first-time buyer with low credit score or in financial difficulty, a broker will locate lenders who will assess your requirements and offer competitive interest rates on loans.
Your mortgage broker may suggest a cheaper loan product than what your bank offers, or they might help you access a government program that can reduce the cost of your loan. Remember, they must act in your best interests by suggesting only loans that you can afford and are likely to get approved.
How Much Does a Mortgage Broker Charge?
Most mortgage brokers charge a flat fee for their services, which is often included in the loan amount. This could be added onto the loan amount as an extra cost or paid at closing by the lender as part of the overall fee structure.
Some brokers charge an up-front fee for their services, which may be a deterrent to new buyers since it appears like too much money up front. If you are uncertain about the fee structure, consult your lender before hiring a broker.
Finding the Best Mortgage Rates
A mortgage broker is an invaluable asset when searching for the best home loan rate. They have connections with numerous lenders and do the hard work to identify which ones offer competitive rates on specific products.
They could potentially save you valuable time by engaging in negotiations on your behalf. For instance, they might be able to work with a lender on your behalf to secure a lower interest rate than what you would get on your own, potentially saving thousands of dollars over the life of the loan.