What is a mortgage broker?
A mortgage broker helps match you with the right mortgage loan and lender for your needs. Their job is to learn all about your circumstances — down payment, credit, income, and so on — then find the best home loan for you.
Some people choose to work with a mortgage broker because it can be easier than finding a loan by yourself. But many prefer to shop around and compare options on their own.
The ability to request rates and apply online makes shopping for a home loan without a broker easier than ever.
In this article (Skip to...)
- What a broker does
- How to find a mortgage broker
- Broker fees
- How to choose a broker
- Mortgage broker vs. bank
- Should you work with one?
What a mortgage broker does
Choosing the right mortgage is almost as important as choosing the right house, since you’ll likely be paying off the loan for years to come. You want to find the best rates, lowest fees, most reputable lender, and the loan program that best suits your needs — it’s no small task.
A mortgage broker can take on that heavy lifting by identifying loans that are suited to your circumstances and helping you submit your mortgage applications. They may even have the inside scoop on which lenders have the best reviews and can recommend loan products that align with your personal finances and goals.
Again, it’s possible to do all of this on your own. But if you’re not comfortable learning about mortgages and making the choice on your own, a broker can be very helpful.
Do you have to pay mortgage brokers?
Mortgage brokers are paid by either the lender or the borrower, but they cannot be paid by both. Furthermore, a broker should disclose their fees upfront.
While broker fees vary, they’re generally between 1% to 2% of the loan amount. So for a $400,000 home loan, broker fees will likely be between $4,000 to $8,000.
Keep in mind that a broker fee is on top of the other closing costs you’ll pay as a borrower, including underwriting or origination fees, home inspection, and pulling your credit report, to name a few.
How to find a mortgage broker
You can find a mortgage broker by looking online, asking your real estate agent, or speaking with friends and family.
Websites and online reviews
You can search for a broker through sites like FindAMortgageBroker.com or search for local brokers in your area. Check reviews on Google, Yelp and other review platforms to source a range of people’s experiences.
When you evaluate potential brokers, be sure to look for comments about:
- Closing times
- Loan success
- Customer service
This will help give you an idea of how communicative and helpful different brokerage are.
Recommendations from friends and family
Ask your loved ones whether they’ve used a mortgage broker, and if they would recommend them.
People you’re close to will give you candid feedback about whether they liked a particular broker and the overall impression they had from working with them.
They may also give details about professionalism or personality that you won’t find in other reviews, but which might heavily influence your decision.
One question you definitely want to ask is whether they felt the broker put their needs first. If a friend or family member felt that their broker pushed a certain lender or loan option even when the home buyer felt reluctant, treat that as a red flag.
You’re the borrower, and you should feel confident that your broker is helping finding the best mortgage lender for your situation, rather than working in their own interest.
Referrals from a real estate agent
Your real estate agent can be a valuable resource for referring mortgage brokers. Your agent likely knows the type of mortgage and home you’re looking for, and they can recommend brokers who work with buyers similar to you.
They may even have long-standing relationships with brokers and be able to make trusted recommendations based on years of professional interactions.
Real estate agents have a vested interest in recommending a quality broker. If the broker can’t close the loan on time, the sale might not go through and the agent doesn’t get their commission.
How to choose a mortgage broker
Whether you’re a first-time home buyer or refinancing your home loan, it’s important to find a mortgage broker you’ll be comfortable working with throughout the home loan process.
Asking the following questions as you evaluate different brokers can help you find one who fits your needs.
Do I need help qualifying for a specific loan type?
When looking for a mortgage broker, it’s important to think about your goals as a homeowner. That way you can choose a broker who has experience working with similar buyers and knows how best to help you.
- If you’re worried about bad credit being an obstacle to homeownership, you’ll likely feel more comfortable with someone who has a history of helping folks like you find a mortgage loan
- If you want to buy a rural fixer-upper, you’re probably going to look for someone who is well-versed in FHA- and USDA-backed mortgages
- If you’re in the market for a luxury home, you could benefit from having a broker who is familiar with jumbo mortgages
Knowing what type of home you want and understanding your financial profile will help you narrow down which brokers are best for you.
Is this mortgage broker licensed?
You can verify that a broker is licensed through the Nationwide Mortgage Licensing System & Registry (NMLS) website.
The Consumer Financial Protection Bureau (CFPB) notes that you can also contact your state regulator to find out whether the broker has ever been subject to any kind of disciplinary action.
Similarly, the Better Business Bureau keeps a listing of broker reviews, complaints, and, in some cases, ratings.
What is it like to work with this broker?
Applying for a mortgage is an emotional process. There’s a lot riding on your decision about which lender to work with and you need to ensure you understand the terms of the loan.
You want to work with a broker you’re comfortable with, one you know will walk you through these big decisions. And a lot of that trust and confidence comes down to their working style.
Think about your expectations for how you’ll communicate with a broker.
- Do you want them to be in touch regularly, checking in with you throughout the process?
- Do you expect them to be available after-hours to answer questions?
- Do you prefer texts or phone calls?
- How big is their typical workload; will you be a top priority?
You might find a great broker but opt not to work with them if you’re not going to get the personalized support or type of customer service you need to put your mind at ease.
What is their availability?
If you’re in a hurry to buy a home or refinance one, you want to know that your mortgage broker is ready to move as fast as you are.
Ask how many clients they typically work with at one time and when they will be available to begin looking for loans for you. Someone who has their hands full is not going to be able to give you the attention you need if you want to buy right away.
But if you’re not on a tight timeline, you can focus more on finding someone who suits your customer service and personality expectations and start the home buying process in earnest when they have availability.
>Related: How to shop for a mortgage in one day
What’s the difference between a mortgage broker and a bank?
Mortgage brokers work with a variety of lenders and loan officers, multiple banks, and even credit unions. So they can help you find the right loan type as well as the best mortgage rate.
A bank or credit union, on the other hand, will only recommend loan products from its own portfolio. So a bank can likely help you find the right type of loan, but it won’t help you compare interest rates from other lenders to see if you’re getting the best deal.
Importantly, mortgage brokers provide access to a broad range of loan options, rather than limiting you to the products offered by just a handful of lenders.
This may help you secure a better loan and interest rate than you would have if you had simply looked for lenders on your own.
Should you work with a mortgage broker?
If you find a mortgage broker you trust, they can be a huge asset in the mortgage application process. They can likely source more product options than you’d find on your own, and you may have more luck negotiating with them than directly with a lender.
You might consider working with a mortgage broker if:
- You’re slammed with work and want someone else to do all the comparisons for you
- You feel overwhelmed by comparing lenders and want an expert opinion
- You have a spotty credit history or low credit score and need someone to help you find a lender who is willing to work with you
A broker can also help you pinpoint lenders who offer the specific types of loans you need, such as a VA loan, low-down-payment mortgage, or a jumbo loan.
However, it can take longer to close a loan through a broker than a lender. A loan officer may be able to “push your loan through” if you’re on a tight closing timeline. Brokers have less ability to rush processing. After all, they are not on staff at the lending company, but rather independent agents.
Brokers also have limited control over what the lender does with your loan, which could be a problem if there is a hold-up or the loan is denied.
Are you ready to find a mortgage broker?
With so many mortgage companies and online lenders clamoring for your business, it’s easy to see why using a broker is appealing. Yet, the decision really comes down to your home buying timeline and whether you think you can get a better rate or loan through a broker.
If you’ve worked with certain lenders before and feel confident with them, or you’ve already sourced solid recommendations from friends and family, going directly to lenders may be your best bet.
But if you want a broker’s expertise, they could be a great addition to your home buying team.