What is a mortgage broker?

A mortgage broker helps connect homebuyers with lenders. According to data compiled by Zippia, there are over 25,500 mortgage brokers working in the U.S. Some brokers simply put you in touch with a loan officer who fits your needs, while others will act as a go-between throughout closing. 

Learn about what a mortgage broker is, along with benefits and drawbacks so you can decide if working with a mortgage broker is right for you.

What is a mortgage broker? 

A mortgage broker is someone who helps homebuyers find the best home loan for their personal needs. Many mortgage brokers have a specific network of lenders they work with, so they are well versed on the interest rates and loan terms that each lender will offer to a specific type of borrower.

You might prefer to work with mortgage brokers to spare yourself the hassle of applying to multiple mortgage lenders to find the best rate. Instead, you could give a mortgage broker your information, and the broker will find the best lenders based on your needs and credit profile. Rather than having to apply to every lender individually, brokers are able to quickly submit your financial details to multiple lenders at once. 

How does using a mortgage broker work? 

You might find mortgage brokers who are exclusively online and others who are available in person. Whether you meet face-to-face or online, you’ll discuss what you’re looking for with your mortgage broker. Once you choose a lender, you’ll be connected with a loan officer who works for the financial institution you’ve selected. 

A more hands-on mortgage broker, however, might communicate with loan officers and underwriters on your behalf. If you have a busy work and personal life, this means you can avoid a lot of the constant back-and-forth communication that occurs during the application and underwriting process. 

What are the pros and cons of using a mortgage broker? 

Working with a mortgage broker could be useful during the homebuying process but you should consider the advantages and disadvantages first: 
 

Mortgage broker vs. lender vs. loan officer: What’s the difference?

Understanding the subtle differences between mortgage brokers, mortgage lenders, and loan officers can be a little confusing, but there are some key differences to keep in mind. 

Mortgage lenders are financial institutions that provide borrowers with the money needed to purchase a new home. 

A loan officer works for the lender, evaluating your mortgage application and credit history. If they need additional information or financial documents, the loan officer will typically reach out to you directly. If they approve your application, they’ll also provide you with a loan estimate, which would include an origination fee. 

Working with a mortgage broker is optional when financing the purchase of a home. Ultimately, a mortgage broker’s job is to connect you with the right mortgage lender. Many mortgage brokers will also communicate with loan officers and underwriters on the borrower’s behalf. If there are requests for more paperwork, a mortgage broker can take care of them for you. 

What are the roles and responsibilities of a mortgage broker? 

If you are a first-time homebuyer, working with a mortgage broker can make it easier to buy a home because they often take on a lot of the responsibilities that would usually fall to you. Some of the tasks a mortgage broker will handle include:

• Research lenders: If you have a low credit score or unique mortgage needs, a mortgage broker can help you find the best lender for your situation. For example, if you’re a veteran looking for a VA loan, a mortgage broker could help you find lenders with the most experience handling that type of financing.
• Explain options: There are more types of loans on the market than many people realize, such as state and local programs or special loans for medical professionals. A broker can help you find loans you might not know about and narrow down your options.
• Gather documents: Lenders need a variety of documents to ascertain your credit history and financial profile. Brokers can help gather and submit those documents for you.
• Communicate with the lender: Ongoing communication can often be done entirely between your lender and your broker. This means that your broker can help resolve any issues that arise during underwriting.
• Help with closing: Closing can sometimes be tricky to coordinate between everyone involved, which can include an escrow officer, real estate agents, the seller, and attorneys. Brokers can help arrange meeting times for each step to ensure the day goes as smoothly as possible.

How much does a mortgage broker cost? 

Amounts vary depending on which mortgage broker you work with, but the costs are usually between 1% to 2% of the loan principal. For example, if you buy a $400,000 home, you can expect to spend between $4,000 and $8,000 for a mortgage broker.

Some mortgage brokers, however, have a fixed cost, typically between $1,000 and $2,000 for every $100,000 you borrow. 

What is a mortgage broker FAQ 

How do I choose a good mortgage broker?

It depends on what you’re looking for, but if you’re looking to work with an independent mortgage broker, start by checking online reviews. Even if you find a near-endless stream of five star reviews, ask for a list of references. Question their past clients about what they liked about the broker, what they didn’t like, and why they would or wouldn’t work with them again. 

While many brokers don’t charge their clients any fees, there are some who do. If you find a mortgage broker you really want to work with, make sure you fully understand their fee structure.

What questions should I ask a mortgage broker?

One of the primary benefits of working with a mortgage broker is that they can quickly connect you with multiple lenders, which can make it easy to compare rates and loan terms. Therefore, a good question to start off with is which lenders they are connected with and how many are in their network. 

Also ask about their fee structure. Are you responsible for paying them for their services, or are they paid by the lender? Do they charge a percentage or a flat fee?

Lastly, ask them how they will help you throughout the homebuying process. Do they consider their job done once you’ve chosen a lender, or will they communicate with the lender throughout and help assist with closing?

Are mortgage broker fees negotiable?

Fees may be negotiable, but it depends on the broker. Ask them directly when you first meet. 

If the broker isn’t willing to negotiate their fees, don’t be afraid to shop around and compare mortgage brokers. However, depending on what you’re looking for, you may decide a broker who charges more has a network and experience that are worth the additional costs.

Do mortgage brokers charge upfront fees?

It depends on the mortgage broker. Mortgage brokers must disclose their fees and what each cost is for, so you’ll know what to expect right away. They often earn a commission from the lender for any loans they help originate and close, or they’ll charge you a portion of the loan amount at closing. 

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

The biggest difference between a mortgage broker and a loan officer is that mortgage brokers are affiliated with multiple lenders, whereas a loan officer works for a specific lender. If you’re working with a mortgage broker, the loan officer may communicate with the mortgage broker instead of contacting you directly for additional paperwork. Depending on which mortgage broker you choose, they may handle much of the communication for you, which can make the whole process easier if your attention is needed elsewhere.