What does a mortgage broker do?

Despite the excitement of buying a house, taking out a mortgage can be one of the most stressful and complicated events in your life. From pre-approval to funding, there are many moving parts to manage.

A mortgage broker can help make the home loan process a little easier for you, ensuring that you find a lender and loan for your big purchase — but they aren’t right for everyone. Here’s what you need to know about mortgage brokers, what they do throughout the homebuying process, and whether you should work with one.

• What is a mortgage broker?
• When to see a mortgage broker
• How does a mortgage broker get paid?
• What’s the difference between a mortgage broker and a loan officer?
• Pros and cons of working with a mortgage broker
• How do you choose a mortgage broker?

What is a mortgage broker?

A mortgage broker is a licensed third party who essentially acts as a liaison. A broker’s job is to find the best mortgage lenders and home loan rates for your unique situation. This means shopping around and comparing lenders on your behalf, as well as analyzing the best loan options for you. Mortgage brokers don’t lend money or originate mortgages. They simply play matchmaker, helping you find the right lender that does.

A mortgage broker typically works with multiple lenders and understands each one’s application process. Brokers can help you prepare to apply for your new mortgage loan by offering guidance about the process, such as telling you which documents to gather before submitting your application, and determining which lenders could be right for your situation. They can also help you avoid hidden fees and higher interest rates from lenders.

When to see a mortgage broker

As a buyer, you aren’t required to work with a mortgage broker, and in some cases, you may not want to. But working with a mortgage broker may be a good idea if:

• You don’t have great credit, or you don’t have any credit. A mortgage broker can help you find lenders that will manually underwrite your loan, and may make it easier for you to at least get a foot in the door.
• You have a unique borrowing situation. If your financial situation or borrowing arrangement is unconventional in any way, working with a broker could be helpful.
• You want to speed up the application and underwriting process. If you need to get the ball rolling on a mortgage loan faster, a broker may be able to help. They can vet lenders on your behalf and narrow down the loan options that are right for you, without you having to research, apply or even submit your info multiple times.

How does a mortgage broker get paid?

A mortgage broker can be paid by commission, by salary or both, depending on whether the broker works for a lender or works independently. In some cases, the lender will pay the mortgage broker’s fees, while in other cases, the borrower pays.

The loan origination fee paid to a mortgage broker is often calculated as a percentage of the total loan amount. Mortgage brokers get paid when the loan closes.

What’s the difference between a mortgage broker and a loan officer?

A loan officer is a representative who works directly for a particular bank, lender or other financial institution. Their job is to evaluate borrower applications and guide those borrowers to the right loan product for their specific situation. A broker, on the other hand, helps homebuyers search for the right loan product from multiple lenders.

Pros and cons of working with a mortgage broker

When shopping for a mortgage loan, consider these benefits and drawbacks of working with a mortgage broker.

Pros

• A mortgage broker can do the heavy lifting for you. The right mortgage broker can save you time by doing the research for you. The broker will help you determine your mortgage loan options, gather paperwork and can submit applications on your behalf.
• You may be able to save money on your new loan. Mortgage brokers can help you find the best mortgage lender for your exact situation, at the most competitive price. This means that you may snag a lower interest rate or have fees waived when you work with a broker.

Cons

• Some lenders don’t work with brokers. Though mortgage brokers have access to hundreds of different lenders, they can’t necessarily help you access all those lenders. Some lenders won’t work with mortgage brokers, which may limit your lender options.
• You may have to pay your mortgage broker. In many cases, the loan origination fee paid to a mortgage broker will come out of your pocket.

How do you choose a mortgage broker?

When it comes to finding a good mortgage broker, word of mouth is one of the most valuable and trusted sources. If you have friends, family members or neighbors who recently purchased a home, consider asking for a mortgage broker referral.

You can also look for a mortgage broker online, where you may be able to read reviews and find trusted brokers in your area. Once you’ve found a broker, you can verify their credentials by checking the Nationwide Multistate Licensing System & Registry (NMLS) database.