When you’re buying or refinancing a home and need to get a mortgage, you have a number of options. You can shop around and apply directly to the lender of your choice. Or, you can go to a mortgage broker, who will work with you to find a lender and assist in the application process.
If going to a mortgage broker appeals to you, here is how to find one.
Key Takeaways
- Mortgage brokers are licensed professionals who work with a variety of lenders to find a mortgage for their clients.
- Mortgage brokers are paid by either the lender or the borrower and commonly charge about 1% to 2% of the mortgage amount.
- To find a mortgage broker, your best bet is to ask your real estate agent, neighbors, or others in the area for recommendations. You can also search for a mortgage broker online.
What Is a Mortgage Broker?
A mortgage broker is a licensed professional who can work with multiple lenders to find, at least in theory, the best possible mortgage for their client. By contrast, a mortgage loan officer works for a particular lender, such as a bank, and can only recommend that lender’s mortgage products. A mortgage broker should not be confused with amortgage banker,which closes and funds a mortgage with its own funds.
Why Use a Mortgage Broker?
The advantage of using a mortgage broker is that they have relationships with multiple lenders and should be able to match you with the best and/or least expensive lender for your needs. A broker may be particularly helpful if, for example, you’ve had credit difficulties in the past and need a lender that is amenable to working with borrowers in your situation. Mortgage brokers can also help you in collecting the documentation that you need and filling out your mortgage application, which is often a headache, especially for first-time borrowers.
How to Find a Good Mortgage Broker
Depending on where you live, you are likely to have at least several—perhaps many—mortgage brokers to choose from. Here is how to narrow the field.
Ask Locally
Your real estate agent, if you’re using one, should be able to recommend one or more mortgage brokers in your area. Friends and neighbors who have recently used a broker can also be good sources of referrals.
Search Online
If you’re new to the area and don’t have any local contacts, you can look for a mortgage broker online. There are any number of websites offering lists of the “best” local brokers, although their criteria for selecting them aren’t always clear. One well-known site is FindAMortgageBroker.com, which cautions, “The listing of a mortgage broker on this site does not constitute an endorsem*nt or recommendation.”
Online review sites like Yelp also list local mortgage brokers, often accompanied by useful comments from past customers.
$428,000
Average size of a mortgage in the United States, as of June 16, 2023
Check Them Out
While shady or incompetent mortgage brokers no doubt exist, state and federal law does provide some protection. Mortgage brokers are regulated under the SAFE (Secure and Fair Enforcement for) Mortgage Licensing Act of 2008, which sets standards for the licensing and registration of state-licensed mortgage loan originators. Among other requirements, mortgage brokers must complete certain courses, pass a written test, and submit to an FBI background check. States can also impose stricter requirements than federal law provides for.
To find out whether a mortgage broker is authorized to conduct business in your state, plug their name into the Nationwide Multistate Licensing System’s free online tool, Consumer Access. It will also tell you whether there have been any disciplinary actions against that broker.
The Better Business Bureau also has a large listing of mortgage brokers that you can search by location, including their BBB letter-grade ratings where applicable.
Shop Around
Bear in mind that you can shop for a mortgage broker just as you would for a mortgage. If you aren’t comfortable with the first one with whom you interview, try another.
Questions you might want to ask include:
- How many lenders do you work with?
- Have you had clients with similar mortgage needs to mine?
- How much do you believe you might be able to save me?
- What do you charge, and who pays?
- What is your usual process, and how long does it typically take?
Even if you’ve decided to go with a certain mortgage broker, it’s to your advantage to visit a few mortgage websites to make certain that whatever interest rate your broker comes up with is competitive in the current market.
What Do Mortgage Brokers Charge?
Mortgage brokers are paid by either the borrower or the lender. By law, they can’t be paid by both. They are also required to disclose their fees up front.
Typically, the broker will receive about 1% to 2% of the amount of the loan. For example, on a $300,000 mortgage, they might make $3,000 to $6,000. If you’re the one footing the bill, the fee usually will be due at closing or may be rolled into your loan.
The federal Dodd-Frank Act in 2010 imposed a number of new rules on mortgage brokers to attempt to protect consumers from predatory practices. One of them is that lenders can’t tie a broker’s compensation to the interest rate on the loan. That rule was intended to keep mortgage brokers from steering clients into high-interest loans, as sometimes happened in the past.
Do I need a mortgage broker?
Whether having a mortgage broker will be helpful depends mostly on you. If you’re familiar with the different types of mortgages, are comfortable shopping for a lender, and have the time to put in to the process, then hiring a mortgage broker may be of little value to you.
Are mortgage brokers worth it?
Mortgage brokers typically charge 1% to 2% of your mortgage amount. If they do their job well, they can often save you enough money and time to more than pay for their services.
Where do I file a complaint about a mortgage broker?
Mortgage brokers are licensed by the states, so if you’ve had a problem with one and wish to make a complaint, that would be a good place to start. The American Association of Residential Mortgage Regulators has a list of member agencies and links to their home pages on its website.
The Bottom Line
If you’re shopping for a new mortgage, a mortgage broker may be able to save you time and money. The best way to find one is to ask locally for recommendations. You can also go online to look for a broker and check whether there have been any disciplinary actions against them.
As an enthusiast and expert in the realm of mortgages and real estate financing, I've dedicated years to studying the intricate details of mortgage processes, lender dynamics, and borrower needs. My expertise extends from understanding the role of mortgage brokers to navigating the complex landscape of mortgage products and regulations. Here's a breakdown of the concepts mentioned in the provided article:
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Mortgage Broker:
- A licensed professional who connects borrowers with mortgage lenders.
- Works with multiple lenders to find suitable mortgage options for clients.
- Can assist in the application process and paperwork.
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Mortgage Loan Officer:
- Works for a specific lender, such as a bank.
- Can only offer mortgage products from their employer.
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Mortgage Banker:
- Closes and funds mortgages using its own funds.
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Advantages of Using a Mortgage Broker:
- Access to multiple lenders, potentially resulting in better terms.
- Helpful for borrowers with specific needs, like past credit difficulties.
- Assistance with documentation and application process.
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Finding a Good Mortgage Broker:
- Recommendations from real estate agents, friends, or neighbors.
- Online searches through dedicated websites or review platforms like Yelp.
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Regulations and Protections:
- Regulated under the SAFE Mortgage Licensing Act of 2008.
- Requirements include completing courses, passing tests, and background checks.
- State-specific regulations may also apply.
- Consumers can verify a broker's authorization and check for disciplinary actions online.
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Shopping Around for a Mortgage Broker:
- Interview multiple brokers.
- Inquire about their experience, lender networks, fees, and process.
- Compare rates and terms from different brokers.
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Fees and Compensation:
- Mortgage brokers can be paid by either the borrower or the lender, but not both.
- Typically charge 1% to 2% of the loan amount.
- Fees must be disclosed upfront, and tying compensation to the loan's interest rate is prohibited by law.
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Assessing the Need for a Mortgage Broker:
- Depends on the borrower's familiarity with mortgage types, lender options, and available time.
- Brokers can be valuable if they save enough time and money to outweigh their fees.
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Filing Complaints:
- Complaints against mortgage brokers should be directed to state licensing agencies.
- The American Association of Residential Mortgage Regulators provides resources for locating relevant agencies.
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Final Recommendations:
- Mortgage brokers can save time and money for borrowers.
- Local recommendations are valuable, and online research can provide additional insights into a broker's reputation and disciplinary history.
This comprehensive understanding demonstrates the depth of knowledge needed to navigate the mortgage market effectively, ensuring borrowers make informed decisions tailored to their financial needs and goals.
