In a Nutshell
A mortgage broker can help you shop for a home loan with competitive rates and terms. But, you may have to pay added fees for their efforts.Shopping for a home loan can be daunting. A mortgage broker may be able to help you find the best deals.
Rates and fees can vary significantly between lenders, so shopping around is key to finding the right mortgage. But, there are thousands of mortgage lenders, and selecting a lender can be challenging. A mortgage broker can be invaluable in helping you find a lender that works for your needs.
Mortgage brokers work with various lenders — including credit unions and local banks — to find competitive loan rates and terms available in your area.
- What is a mortgage broker?
- How does a mortgage broker make money?
- What’s the difference between a mortgage broker and a loan officer?
- Pros and cons of working with a mortgage broker
- Is a mortgage broker right for me?
- How to choose a mortgage broker
- FAQs about mortgage brokers
What is a mortgage broker?
A mortgage broker isn’t a lender, nor are they connected to a particular bank or credit union. Instead, mortgage brokers work independently to identify home loan options from banks, credit unions and other financial institutions.
Buying a house may be the biggest investment you’ll ever make and researching your options is crucial. A mortgage broker can help you find the right loan for your financial situation.
A mortgage broker will research the market and special programs available, such as low down payment or down payment assistance programs for first-time homebuyers, and help you navigate the preapproval and application processes.
Mortgage brokers are licensed professionals, typically covered by bonds or recovery accounts that guarantee the broker will fulfill their obligations to their clients.
How does a mortgage broker make money?
Mortgage brokers are paid a fee or a commission based on the loan amount. Their fee or commission could be paid by you as the buyer, or it could be paid by the lender.
Like shopping for an agent or a lender, it’s wise to shop around for mortgage brokers, too, since fees can vary by broker.
What’s the difference between a mortgage broker and a loan officer?
Mortgage brokers and loan officers can play crucial roles in the homebuying process.
While a mortgage broker is independent and can work with many lenders to find a mortgage for you, a loan officer is connected to a specific lender. The loan officer is the point of contact with the bank or credit union you’re borrowing from, and the officer is who you’ll work with to submit your mortgage application and supporting documentation.
The loan officer will review the mortgage options available to you from the financial institution they represent, and they will ensure that the loan disclosures and other documents meet legal requirements.
Pros and cons of working with a mortgage broker
There are several advantages to working with a mortgage broker, but there are some drawbacks to consider, too.
Pros
- Personalized assistance — A mortgage broker provides personalized assistance throughout the home loan process, from getting preapproval to closing. For first-time homebuyers, that extra help can be especially beneficial.
- Simplifies comparison shopping — There are thousands of mortgage lenders, so finding the right one can be daunting. A mortgage broker can streamline the process, using their expertise and contacts to find the right home loan for your financial situation.
- Potential savings — Mortgage brokers know the market and can negotiate with lenders to get better deals by asking them to waive application or origination fees.
Cons
- Added cost — Mortgage brokers don’t provide their services for free. The fees for a mortgage broker can add hundreds or thousands to your overall cost.
- May miss out on some opportunities — Although mortgage brokers work with many lenders, it’s nearly impossible to work with all of them. As a result, there’s no guarantee that the broker will find the lowest possible rates.
Is a mortgage broker right for me?
Whether it makes sense to work with a mortgage broker depends on your knowledge of the homebuying process and comfort in finding a lender. If you’re a first-time homebuyer or shopping for a home in a hot housing market, a mortgage broker can help you through the process and find a loan that works for you.
How to choose a mortgage broker
When researching mortgage brokers, make sure that they are licensed. You can look up licensing information for specific brokers at the National Multistate Licensing System and Registry website.
Besides licensing information, ask about the broker’s fees or commissions and how they are paid. They can be paid by you or the lender, and the cost can vary between brokers.
FAQs about working with a mortgage broker
Your real estate agent can be an excellent starting point to find a reputable mortgage broker. They likely know several brokers and can recommend one their previous clients used. Friends and family can also be good sources for recommendations.
You can also use search databases on sites like Zillow and Rocket Mortgage to find licensed mortgage brokers near you.
Fees or commissions vary by mortgage broker. But generally, brokers are paid between 1% and 2% of the loan amount.
Applying for a home loan
Once you’ve decided whether working with a mortgage broker is right for you, you can start the next phase of the homebuying journey. Getting preapproved is the next step in buying a home and it will give you an idea of how much you can borrow and let sellers know you’re a serious buyer.