Mortgage Broker Commissions Explained

Mortgage brokers

Mortgage brokers play a vital role in the mortgage process, but are often misunderstood. A mortgage broker works as an independent intermediary who brokers mortgage loans for companies or individuals. A mortgage broker’s services are used by borrowers and lenders alike in the mortgage loan process. As such, there are some myths associated with mortgage brokers that need to be dispelled. Here are five of the most common:

Mortgage brokers must deal with only lenders. This is simply not true. In fact, there are many types of brokers that work with both individual borrowers and lending institutions such as banks. Mortgage brokers must simply do the job that their customer requires, rather than go out and seek loan opportunities on their own.

Mortgage brokers may not make money on their own. This is often mentioned as a reason that homeowners should not hire them, and it is true that the vast majority of mortgage brokers may not earn a substantial amount on their own. However, in today’s economy home buyers are increasingly finding that hiring mortgage brokers can often mean saving hundreds of dollars per year. Brokers often get paid on commission and this means they are more likely to use their connections to negotiate the best interest rates for their clients. The same is true for those who are not getting paid commission; however, there are many home buyers who simply do not have the time to seek out and find the best interest rates on their own.

Mortgage brokers cannot compete with retail banks. This is simply not the case. There are literally dozens of independent mortgage brokers in each and every state. Retail banks do not typically operate in every area of the country, and this is a major reason why they have an edge when it comes to pricing real estate loans. National mortgage brokers day in and out compete with their counterparts, and this often leads to lower interest rates and better customer service. Homeowners can easily shop around for the best deal in town without worrying that their broker will be replaced by another retail bank any time the market turns.

Mortgage brokers work under a different set of regulations than most lending institutions. They have to follow federal laws and their states’ laws regarding interest rates, loan amounts, origination fees and more. Although all these laws are subject to change on occasion, brokers must follow them at all times because they are the ones regulating the loans that their customers apply for. While lenders are allowed to vary their rules from time to time, brokers cannot. This is important because the exact opposite of regulation is laxity, which makes the process for applying loans much more complicated and lengthy than it has to be.

Homeowners who want the best interest rates on their refinance or new mortgage can simply take advantage of the competition between lenders by hiring mortgage brokers. Brokers don’t earn any type of commission unless they help their clients secure the loans they need. Therefore, the majority of brokers are absolutely required to do their best work possible in order to continue receiving commissions. This means providing good service to every client they assist – whether the service is required or not.