Did you know that mortgage debt was worth over $11 trillion just in the first quarter of 2022?
Mortgages are the backbone of the housing market, and the only way a person can afford a home in the first place. But to find a mortgage, people need to find a suitable mortgage lender. That’s where a mortgage broker comes in.
What is a mortgage broker? They may sound like just a middleman, but they’re a bit more than that. Keep reading as we discuss what a mortgage broker does and how they make their cut.
What Is a Mortgage Broker?
A mortgage broker is someone who knows mortgages and credit scores really well. They’re intimately familiar with the market, in particular lenders, their rates, and their conditions. They know the process for applying for a mortgage and choosing the right mortgage loans for all financial situations.
Mortgage brokers communicate the needs of both parties–lenders and borrowers–to ensure the process goes as smoothly as possible. They need to obtain a mortgage broker license to practice. After that, it’s their goal to help home buyers save money and avoid shady dealers.
What Things Does a Mortgage Broker Do for Home Buyers?
A mortgage broker’s purpose is twofold: help lenders find borrowers, and help borrowers find good lenders. But during that process, they may do some or all of the following:
- Help to obtain preapproval for loans
- Help owners prepare their documents before they apply
- Help owners fill out the application
- Find ways for owners to save money during the process
The question is, is a mortgage broker necessary? Technically, no. Anyone can get a mortgage on their own without the assistance of a broker.
However, it could be more difficult. Brokers know the market and can help if your credit score isn’t good. Further, they could wrangle you a better deal by negotiating with the bank.
How Does a Mortgage Broker Make Money?
After the contract is signed, they may get a commission for a job well done. However, this commission will only come from one party. In most cases, the commission originates from the credit union or bank that gave out the mortgage.
If it does come from the owners, the law does not allow them to charge any fees that they do not disclose upfront. They must itemize the bill clearly for your records.
Generally speaking, the fee won’t be more than 1% of the loan’s total amount. This payment happens only once the mortgage is finalized, and not a moment sooner. Fortunately, there won’t be any hidden fees to speak of aside from these.
Find a Mortgage Broker Today
What is a mortgage broker? It’s a crucial go-between for home buyers and lenders to make the mortgage application go as smoothly as possible. Mortgage brokers can make a small commission for their work, but this usually only comes at the expense of one or the other.
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