Mortgage Brokers – Their Fees And Commissions
Mortgage brokers have one reason for being: to earn a commission when they get you approved for a mortgage. Almost every licensed mortgage broker works only on commission; very few have jobs where they receive a salary and work only for one particular lender.
If you happen to drop into a bank to talk about a mortgage, the person who sits down with you is nothing more than an advisor, or someone with an equally administrative title and no authority. He will help you fill out paperwork and talk about the possible deals that bank has to offer based on many variables in your particular situation. He is probably on commission but other than taking your application and turning into your only contact at the bank, he has nothing to do with whether or not your loan is approved. The people who act in this capacity do not need to be licensed.
Actually, a mortgage broker doesn’t do much more than the loan advisor. His goal is to get you interested in what he has to offer so that he can get you to fill out an application and get your credit report. Chances are, even if you tell him you have awful credit and little money, he will promise you that he has lenders who’d love to do business with you.
On the other hand, aside from the mortgage, your purpose is to make sure your credit report is pulled only once or twice. The more often your credit report is pulled, the lower your FICO score. It takes a hit with each inquiry, and when you have multiple lenders looking at your credit history, there is an assumption by each successive inquirer that previous lenders turned you down – and whether it’s true or not, it is detrimental to your score.
No matter what he says to you, a broker is nothing more than one more person who is standing between your paperwork and your final approval. He is a middle man. He has no authority to do anything for you other than give you messages from the lender who might need more information, etc.
These people are usually self employed but they have company names. They build their business by establishing contacts and relationships with various lenders who have different types of programs. His job is to figure out which one might be good for you.
A commission can cost you thousands of dollars but you won’t find out until you get your first copy of your HUD statement. One of the tiny line items on the form shows the commission the broker plans on charging you. Ask him up front what he plans on charging, and you’ll never get a straight answer. He might even tell you that is forced to charge whatever the lender tells him to. However, the lender has nothing to do with this fee. They don’t care. His commission is paid by you, not the lender, at closing.
Do they deserve some of these commissions? It depends. Some brokers do provide a lot of useful information, and are very helpful during the entire process. Others fall off the face of the earth as soon as the application is submitted and won’t even return phone calls. Even if you’re finally approved, they’ll still charge you a fee!
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