Mortgage brokers are intermediaries who manage the mortgage loan process for businesses or individuals. They act as a liaison between borrowers and lenders, researching loan options and negotiating with lenders on behalf of their customers. A broker can also obtain the buyer's credit reports, verify their income and expenses, and coordinate all loan documentation. Essentially, mortgage brokers connect mortgage lenders to borrowers without using their own funds to establish the connection.
They help prospective borrowers find a lender with the best terms and rates to meet their financial needs. A broker's job is to find the best mortgage lenders and the best mortgage loan rates for your particular situation. This means researching and comparing lenders on your behalf, as well as looking at the best loan options for you. Mortgage brokers don't lend money or create mortgages.
They simply play Matchmaker, helping you find the right lender to do it. They typically have relationships with several lenders, allowing them to find you a lender that meets your needs. A broker is an authorized third party that essentially acts as a liaison between you and the lender. In addition, unlike loan officers who work for specific banks, mortgage brokers have access to a wider range of mortgage products, meaning that borrowers can get more favorable interest rates.
While you don't need a mortgage broker to facilitate the transaction, some lenders may only work through mortgage brokers. Many people prefer to work with a broker regardless of their situation, as it allows them to access lenders that they wouldn't dream of looking for. The mortgage broker estimates the amount and type of loan that is appropriate for the borrower and the loan-to-value ratio. Since the mortgage broker does some of the work for the lender, the lender may be willing to exempt you from a fee that they might not exempt you on your own.
Some lenders may offer homebuyers the same terms and rates they offer mortgage brokers (sometimes even better). However, keep in mind that mortgage brokers work on commission and may have preferred lenders who don't always offer the best interest rates. A mortgage broker can simplify this process by connecting homebuyers to the right loans, preparing application materials, and guiding the borrower through underwriting and closing. As a buyer, you are not required to work with a mortgage broker, and in some cases, you may not want to. The loan origination fee paid to a mortgage broker is often calculated as a percentage of the total loan amount.