A mortgage broker is a person who acts as a third-party intermediary who brokers mortgage loans for other people or companies. This individual brokers loans for a fee to the buyer and receives commission for any sold mortgage. A mortgage broker is required to obtain legal authorization from the lender before selling any loan. To ensure legality of the mortgage process, the broker must also obtain written approval from the lender.
Mortgage brokers usually find a good mortgage lender to agree to the mortgage loan. After finding a lender, the mortgage broker submits an application process to the lender for pre-approval. The lender will perform credit checks and decide if the borrower is eligible for the loan. Once the loan approval is obtained, the mortgage broker forwards the application process to the borrowers. You can explore more on business strategies for mortgage loan officers now.
Mortgage brokers are paid a commission based on the interest rate and points that he/she can get from the lender. The commission that is earned by the mortgage broker may be in a form of a percentage or a flat rate. In some states, the commission is also determined by the size of the loan applied for and the size of the borrower's home. If the mortgage lender offers a greater commission to a mortgage broker, the borrower may have a harder time qualifying for the mortgage.
There are two types of mortgage bankers. One is a large mortgage banker that limits its lending activities to a few selected lenders, whereas, the second type of mortgage broker is an independent mortgage banker that accesses various lenders to find the best mortgage loan for the borrower. Although independent mortgage bankers are able to find more lenders for the borrowers, they may not have access to certain lenders that the large mortgage banker has. This page also has more details on income streams for mortgage brokers.
Another difference between mortgage brokers and mortgage bankers is their accessibility to potential borrowers. Mortgage brokers have access to a variety of lenders which a mortgage banker does not have. Mortgage brokers can also work with borrowers on a much larger scale than a mortgage banker. In addition, mortgage brokers often have relationships with other lending institutions such as credit unions and banks that can provide another source of potential lenders for borrowers. In turn, these other lending institutions will offer better mortgage terms to potential borrowers.
Mortgage lenders will only work with a mortgage broker if they believe the broker has extensive experience working with the specific lenders the lender would like to work with. It is important to remember that all mortgage brokers do not have access to all lenders. In fact, there are some mortgage brokers who only work with lenders that are related to the area in which the broker works. This means that if the mortgage broker wants to work with lenders in a different state than the one the borrower lives in, it may be necessary to look into the requirements of the lender in the different state in order to ensure that the mortgage broker is able to qualify for financing from that lender.
This post will help you understand the topic even better: https://en.wikipedia.org/wiki/Mortgage_broker.
