Mortgage brokers are, in essence, matchmakers for borrowers and lenders. Taking a page from Goldilocks, a mortgage broker helps match a borrower, seeking the ideal home loan, with a lender offering the type of loan that’s just right.
Of course, mortgage brokers handle many other tasks when working with clients. In this blog, we’ll examine the job of a mortgage broker, how it’s different from other mortgage professionals, and why you might choose to work with one. Let’s dive in.
Mortgage Brokers: The Matchmakers of Mortgage
Mortgage brokers are intermediaries who connect borrowers applying for mortgages with the lenders offering them.
Unlike mortgage loan originators (MLOs), who work for lenders that fund loans, mortgage brokers don't fund loans. Instead, they help borrowers shop for home loans from multiple lenders while examining loan terms and interest rates that fit their clients’ unique financial situations. Like MLOs and lenders, brokers have a fiduciary responsibility to their borrowers.
How Mortgage Brokers Work & Get Paid
Mortgage brokers may work independently for themselves or for a brokerage. Brokers help borrowers through the entire process of shopping for a home loan, choosing the best loan for their needs, gathering paperwork for mortgage pre-approval, completing the loan application, gaining final approval of the loan, and closing the loan.
They collect a commission fee of roughly 1-2% of the loan amount when their client’s loan closes. This broker fee is paid either by the lender or the borrower.
Responsibilities of a Mortgage Broker
Mortgage brokers handle a lot of moving parts during the real estate mortgage process, including:
Determining How Much a Borrower Can Afford.
Brokers help borrowers understand how much home they can afford based on their credit score and
debt-to-income ratio
.
Comparing Loans & Rates.
Brokers compare loan options and rates, gathering quotes from lenders, and presenting them to borrowers for consideration.
Pre-Qualifying Borrowers.
Brokers help borrowers get pre-qualified for home loans.
Preparing Mortgage Applications.
Brokers gather borrower documentation for loan applications — such as gathering proof of income, credit history, amount of debt, and asset info.
Submitting Loan Applications.
Brokers complete and submit mortgage loan applications on behalf of the borrower.
Helping Facilitate Underwriting.
Brokers serve as liaisons between lenders and borrowers during the mortgage underwriting process.
Helping Expedite Closings.
Brokers also help ensure the borrower’s loan closes on time.
Mortgage Brokers vs. Mortgage Loan Originators vs. Mortgage Bankers
Mortgage brokers function a little differently than MLOs and mortgage bankers.
Mortgage Brokers | Mortgage Loan Originators (or Officers) | Mortgage Bankers |
Work independently or for a mortgage brokerage Match borrowers with potential lenders and loans Serve as go-between between borrowers and MLOs or mortgage bankers | Work for a bank, credit union, or other type of lender Match borrowers with loan products offered exclusively through their lending institution Send loan applications to loan processors and then to underwriters for final loan approval | Work for a bank lender A mortgage banker might also be a company Originate bank loans for borrowers using in-house or borrowed funds Process and underwrite loans secured by MLOs |
Learn more about the differences between mortgage brokers and MLOs and learn more about mortgage bankers.
Pros & Cons of Working With a Mortgage Broker
Working with a mortgage broker to secure a home loan might be the best choice for you. Or it might not be. It depends on your needs in a mortgage professional. Consider these pros and cons of working with a mortgage broker.
The Pros of Working With Mortgage Brokers
They’ll help you find the loan that works best for you and your financial needs.
They can shop for loans from multiple lenders versus just one.
They have access to
non-QM loans
, or non-qualifying mortgage loans, and can assist borrowers who may have been denied at another lender.
They have access to lenders who fund loans for unique properties – like tiny homes or off-grid properties – that do not fit into traditional financing.
They have access to exclusive loan rates and terms — and can flex their negotiating muscles to find you a good deal.
You may have more personalized service and comprehensive support.
They gather documentation, submit loan paperwork, and help manage the timeline of loan processing on your behalf.
Mortgage application and processing may be speedier with a mortgage broker.
Cons of Working With Mortgage Brokers
They may charge you a fee at closing instead of charging the lender.
They may not offer certain types of loans or have relationships with certain lenders.
You might be able to get a better deal with an MLO or a mortgage banker, especially if you already have a financial relationship.
Learn more about working with mortgage brokers.
Do You Need To Be Licensed To Be a Mortgage Broker?
Mortgage brokers must be licensed in their state. They must be registered in the Nationwide Mortgage Licensing System (NMLS) and follow Secure and Fair Enforcement (SAFE) requirements before working as brokers.
Be sure to check your state’s mortgage broker licensing requirements, as some state regulations can vary.
To become licensed, mortgage brokers must:
Just like MLOs, mortgage brokers also must complete national- and state-required Continuing Education (CE) as well as renew their licenses yearly.
How to Find the Mortgage Professional Who’s Right For You
When you’re ready to buy a home and apply for a mortgage, it’s important to work with the mortgage professional who is best for you. Use these helpful tips in your search:
Do a little research and consider the pros and cons of working with each type of mortgage professional.
Interview multiple brokers, MLOs, and/or mortgage bankers to get a feel for how well you'll work together to secure your loan.
Ask for referrals from your contacts. Someone you know may have worked with a great broker or MLO.
Check online reviews and testimonials for mortgage professionals.
Always ensure the mortgage professional you work with is registered in the NMLS. You can also check the
NMLS database
to see if there have been any disciplinary actions against a broker, MLO, or mortgage lender
Learn More About Mortgage Brokers, MLOs, & a Career in Mortgage
Want to learn more about mortgage brokers, mortgage loan officers, mortgage bankers, and all things mortgage? Visit our Mortgage Essentials blog. Considering a career as a mortgage professional? Learn more about our MLO Pre-Licensing, Exam Prep, and CE courses.
