Is a mortgage broker a bank or lender?
No. In fact, they aren’t either. However, acting as an independent contractors, they are licensed professionals who gather documents, review your credit, verify income and apply for loans on your behalf.
Does it cost extra money to use a mortgage broker?
Mortgage brokers are most often paid by lenders, sometimes by borrowers, but never both. Lender-paid compensation plans can range from 0.5% to 2.75% of the loan amount. This cost will be part of your mortgage payment. You can also choose to pay the broker yourself. The rate may be different from the lender-paid option. You will have to ask.
Are mortgage brokers regulated?
Yes, mortgage brokers are regulated by both federal and state laws. They are even regulated by licensing boards.
Do mortgage brokers work for wholesale lenders?
No, brokers are independent businesses that connect borrowers with lenders. They are not employed by the lenders or obligated to do business with any one lender.
Are mortgage brokers different from loan officers?
Yes, loan officers are employees of a lender and are paid a salary and get commissions for writing loans.
Mortgage brokers, work at a mortgage brokerage, which is licensed and regulated, and work with multiple lenders. Some brokers may work with over 10 or 20+ lenders giving them access to a wide range of loan solutions.
Should I worry that a mortgage broker will steer me to the lender who pays them the highest fees?
This would be a rare occurrence if it happens all. There is such a competitive market among lenders and brokers to get your business that offering a borrower the highest rates and fees just wouldn’t make sense. Any mortgage shopper who does their due diligence and checks with a couple of different mortgage companies will ultimately find the loan options that best fit their needs.
In addition, brokers want to provide the best possible service and solutions. This goes beyond just finding you the best rates and programs but also working with lenders who have excellent underwriters, the ability to fund the loan on time and are in compliance with the consumer’s requirements. Also there are strict government guidelines in place to ensure this isn’t happening which include sending mandated disclosures to every borrower.