Mortgage brokers connect borrowers with lenders, offering loan products from multiple lenders. They do not lend money but help borrowers find the best loan deal and gather necessary documents. Brokers earn commissions from closing costs or loan points.
Often people confuse mortgage brokers with lenders, but brokers offer the loan products of multiple lenders, while one lender provides the actual loan money to the borrower. Essentially, a mortgage broker is a loan provider who serves as a liaison between borrowers and lenders. A broker can work within a company or independently.
A mortgage broker does not lend money. Instead, he or she works with borrowers, helping them find properly matched mortgage loans. Typically, he or she will learn the borrower’s needs and do the work of shopping for the best loan deal from the lenders that offer that particular type of loan. Brokers generally work with numerous lenders, trying to match the right lender to each individual customer. Some brokers actually have hundreds of lender contacts. Because they have so many lenders to choose from, brokers are more likely to find loans for borrowers with special needs, like bad credit, than individual lenders.
Mortgage brokers accept applications from borrowers and seek to set rates and terms with lenders. They also provide required state and federal disclosures. Additionally, brokers gather all the necessary documents, including but not limited to credit reports, employment verifications, asset disclosures, and property appraisals. Once the application file is deemed complete, the broker submits it to the appropriate lender, who then handles loan approval and disbursement.
Often a mortgage broker will provide basic credit counseling in an attempt to help borrowers correct credit problems. He or she can also advise borrowers on ways to get better loan rates. Brokers answer questions and help borrowers understand both the application process and loan details. They only offer assistance before the loan process is complete. Once the borrower has obtained a mortgage, the broker is effectively out of the loop and all questions should be asked of the lender.
Brokers earn commissions in exchange for bringing borrowers and lenders together. Typically, the broker’s commission is paid indirectly by the buyer, in the form of closing costs or additional loan points. The mortgage broker receives payment when the loan closes.
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