Mortgage Brokers: What They Do and What To Expect
If you are looking to buy a home but don’t know where to start searching for a lender, a mortgage broker can put together a list of viable options for you. However, this service comes at a cost and is not essential to the homebuying process. Here’s more info to help you decide if working with a mortgage loan broker is the right choice for you.
Key Takeaways
- Mortgage brokers are third-party intermediaries who can help connect you with a mortgage lender and act as a liaison with them during the mortgage process.
- Mortgage brokers charge a fee for their services.
- Mortgage brokers can’t approve you for a loan or fund loans directly.
What is a mortgage broker?
A mortgage broker is a third-party financial professional who connects people interested in taking out a home loan with viable mortgage lenders in exchange for a fee.
Mortgage brokers will take your needs and financial situation into account and connect you with mortgage lenders who might be the right fit. Bottom line, the broker will do the work of finding mortgage loan officers so you don’t have to do it yourself.
Mortgage broker vs. Mortgage loan officer: What’s the difference?
Let’s look at the key differences between a mortgage broker vs. a loan officer:
Mortgage loan officers
Also known as a “mortgage lender,” a mortgage loan officer typically works for a specific financial institution. They have the ability to directly fund any mortgage loans that are offered by their bank or credit union. They can also guide qualified borrowers through the process of applying for home loans, and they have the final say over loan approval.
Mortgage broker
A mortgage broker is a third-party intermediary who can help connect interested borrowers with mortgage lenders in exchange for a commission fee. It’s important to understand that a mortgage broker can’t approve or fund mortgage loans directly. They simply help you coordinate with a mortgage lender who has the power to make the decision on loan approval.
How does a mortgage loan broker work?
A mortgage broker has three main responsibilities during the mortgage closing process:
- Presenting a shortlist of potential lenders: A mortgage broker will comb through their contacts to find a handful of lenders that could be a good fit for you, based on your needs and financial situation. They’ll often negotiate with lenders for you, present you with a few loan estimates and explain the differences between each lender.
- Submitting the loan application: Once you select a mortgage lender, the broker will ask you to gather all your required loan documents so you have everything you need to submit a formal loan application. The broker will likely also help you submit your application to your chosen lender.
- Working as a liaison between you and the lender: Often, a mortgage broker will act as an intermediary between you and your preferred lender as you go through the underwriting process and prepare for mortgage approval.
Ready to take a step toward working with a mortgage broker? Check your credit score with LendingTree Spring today.Pros and cons of working with a mortgage loan broker
| Pros | Cons |
|---|---|
You won’t have to vet mortgage lenders: Mortgage brokers often work with a pool of preferred mortgage lenders that they can refer you to as needed. You’ll have help submitting your mortgage application: A mortgage broker can submit your mortgage application for you, ensuring that you have all essential documents in place. You’ll have an additional go-to resource for the entire transaction: A mortgage broker will typically be there for you throughout the entire process, ready to answer any questions you have along the way. | You may pay an added fee: Mortgage brokers charge a fee for their services, which could be passed on to you at closing. You may not get the lowest interest rate available: Mortgage brokers often work with a specific group of partner lenders. Lower rates may be available elsewhere. Your mortgage lender can offer similar assistance: If you’re willing to do the legwork of finding the right mortgage lender, they can also walk you through the application process and answer any questions that come up. |
Should you work with a mortgage broker?
If you’re thinking of working with a mortgage loan broker, here are some factors to consider:
Signs you should work with a mortgage broker
You have no idea where to start searching for a mortgage lender: Mortgage brokers can offer you a shortlist of potential lenders without you having to do any of the legwork of finding them on your own. Thus, they can save you time during the process.
You feel uncomfortable negotiating with lenders on your own: Mortgage brokers can negotiate with their preferred lenders for you.
You want extra help during the mortgage process: A mortgage broker can be another resource you can rely on during the mortgage process. They can help ensure you provide the right information along the way, as well as answer your questions.
Signs you shouldn’t work with a mortgage broker
You’re comfortable rate shopping on your own: Rate shopping is one of the best ways to save money on your mortgage. If you decide against using a mortgage broker, you’ll have more options to choose from in terms of available loan officers, and you may be able to find a lower mortgage rate.
You have an existing relationship with a mortgage lender: If you have an existing relationship with another lender that you trust, they can offer similar services without the added commission fee. (Note: Some mortgage lenders will charge an origination fee for their services, which you’ll pay at closing, regardless of whether you choose to use a mortgage broker.)
You are familiar with the mortgage process: If you’ve been through the mortgage process before and feel fairly comfortable with it, you may not need a mortgage broker as an added source of support.
Want to learn more about the costs behind getting a mortgage? Check out our guide on mortgage closing costs.
Frequently asked questions
A mortgage broker acts as a third-party intermediary between you and your mortgage lender. They can offer you a list of lenders from which to choose, help you submit your mortgage application and coordinate with your lender as your application is reviewed.
The decision of whether or not to work with a mortgage broker is a personal one. However, as a rule of thumb, if you have an existing relationship with a bank or credit union, it might be a good idea to reach out to them directly as you shop around for the best rate. If you don’t, a mortgage broker will likely be able to connect you with a few viable options.
When you close on a home, your mortgage broker will charge a commission fee that may be paid by you (the fee may be charged to the lender). The fee may be around 1% or 2% of the loan amount. Before you agree to work with a mortgage broker, be sure to ask about their fee structure.