What is a mortgage broker? A mortgage broker is a professional in the mortgage industry who helps a potential home buyer find a mortgage loan.
What is a Mortgage Broker
Brokers essentially act as the "middle-man" between a homeowner and potential mortgage lenders. As the mortgage industry grew, homeowners found themselves with many options to consider when deciding where to borrow money to buy a house. Potential home buyers have the option of borrowing from mortgage banks, local banks, online banks, credit unions, and mortgage wholesalers, among others.
The wide array of options soon become overwhelming for many buyers, especially when options for different types of loans expanded from a standard 30 year fixed rate mortgage to include options for adjustable rate mortgages, balloon mortgages, and interest-only mortgages.
Mortgage brokers stepped in to help confused buyers to interface with lenders and to help buyers navigate the increased competition among lenders. Mortgage brokers quickly became one of the largest sellers of mortgage products in the US.
What Does a Mortgage Broker Do?
Mortgage brokers can work for private clients, such as a standard home buyer. They can also work for businesses and work in the field of corporate banking. Mortgage brokers who work in the corporate field complete a number of complex tasks associated with commercial real estate transactions and other commercial endeavors. However, when most people ask, "what is a mortgage broker?", they are most concerned with what an individual mortgage broker does and how that mortgage broker can help them buy a house.
Mortgage Brokers and Home Buyers
A mortgage broker who works with private buyers is approached by a person who wishes to buy a home. The mortgage broker will evaluate the potential buyer's situation to determine what types of financing he or she can qualify for. The broker will then consider which lender, or lenders, can provide the best loan to the potential buyer. Mortgage brokers usually have relationships with multiple lenders, unlike loan officers who work only for the bank that employs them, so they may provide several lending options.
A mortgage broker will then help you choose a loan and complete the appropriate paperwork in order to qualify for the loan. Brokers may additionally:
- Pull a copy of your credit report
- Help you to assemble documents such as proof of income
- Help you fill out the actual loan application
Once you receive a mortgage loan, the broker is paid a commission. The amount of commission varies depending on the broker you use, the services he provides, whether the lender splits the cost of the commission, or whether the commission is rolled into the closing costs of the mortgage. Ask your broker up front what his or her commission is, and remember that because there is a commission being paid, there can be a small potential for a conflict of interest between your desire for the best loan and the broker's desire to make the largest commission.
Mortgage Broker Pros and Cons
You may wonder whether you should use a mortgage broker or not. The answer largely depends on your situation. If you have good or excellent credit, and the time to do research on your own, you may not need to use a mortgage broker. You should be able to complete the research yourself by evaluating the loans and terms at several different banks. However using a mortgage broker makes a lot of sense if:
- You don't have the time to research
- You don't understand the terms or how to compare loans
- You have poor credit
A mortgage broker may be able to help you find the loan you need.
Find the Best Loan a Broker's Assistance
Remember, for most American's, their home is their largest purchase. Finding the best loan can often be worth the price you pay in commission for a broker. In fact, the amount you save by the broker's ability to find you a deal may pay for the commission many times over.