What Does a Mortgage Broker Do?
A mortgage broker works to identify loan options that meet the needs of borrowers. They help borrowers with everything from finding the right home to completing the transaction and financing it. They do so by gathering information from borrowers, such as income, assets, and employment documentation; a credit report; and other factors, then matching these details with lenders.
The lender pays the broker a commission, called an origination fee, after the loan is closed. The fee can be in the form of a lump sum or incorporated into the total cost of the loan.
Licensed brokers are required to comply with all state laws, including those related to licensing. They also must be members of the National Mortgage Licensing System & Registry (NMLS) and adhere to a Code of Ethics.
They have access to a wider array of lenders and programs than a loan officer can. This can open up a world of mortgage products and payment plans for borrowers who may not qualify with a traditional bank.
A reputable broker will work to get you the best loan for your particular situation and will not push any products that you don’t want. In addition, a good mortgage broker will keep you updated on the status of your application throughout the process and be honest about any fees that are involved with obtaining a loan.
You can find a reputable mortgage broker by asking other people for referrals and checking with your local Better Business Bureau or state regulators to verify their licensing and any complaints lodged against them.
In many cases, a reputable mortgage broker can find you the loan you need at the most competitive rate and with the least amount of paperwork. The key is to find a broker with extensive experience in the mortgage industry and who has a large lending panel to draw on.
They can save you money in the long run by reducing your interest rate and fees. They also can provide you with information about other financing opportunities such as a reverse mortgage or construction loans.
A good mortgage broker will be able to answer all of your questions about the mortgage process, the different types of loans available and the pros and cons of each one. They will also be able to explain any other costs that are associated with owning a home, such as property taxes and insurance.
Some mortgage brokers charge a borrower fee for their services, while others use a lender commission instead. The borrower fee is generally 1% of the loan amount, while the lender commission is 2% of the loan amount.
These fees can be a significant expense, especially if the broker isn’t transparent about them. Borrowers should discuss these fees with their brokers before they begin the process so that they understand the exact costs and can determine whether or not they can afford them.
In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act to curb abuses that can occur between mortgage brokers and borrowers. The law prohibits mortgage brokers from charging borrowers hidden fees, fees that are explicitly yrelated to the loan’s interest rate or fees and points in excess of 3% of the loan amount–among other restrictions.