A mortgage broker is a professional who helps borrowers get a mortgage loan. They are licensed by the California Department of Business Oversight or the California Department of Real Estate (DRE). Mortgage brokers grant or organize first mortgages and secondary (second) mortgages. They act as an intermediary between borrowers and lenders, but do not use their own funds to originate mortgages. Mortgage brokers help borrowers connect with lenders and seek the best option in terms of the borrower's financial situation and interest rate needs.
They collect documentation from the borrower and pass it on to the mortgage lender for underwriting and approval. Brokers can earn a commission from the borrower, the lender, or both at closing. They can work independently or with a brokerage firm. The job of a mortgage broker is to research loan options and negotiate with lenders on behalf of their customers. They can also obtain the buyer's credit reports, verify their income and expenses, and coordinate all loan documentation.
Mortgage brokers are licensed third parties that essentially act as liaisons between borrowers and lenders. Their job is to find the best mortgage lenders and the best mortgage loan rates for their clients. Mortgage brokers don't lend money or create mortgages. Instead, they play Matchmaker, helping you find the right lender to do it. They determine the appropriate loan amount, the loan-to-value ratio (LTV) and the ideal type of loan for the borrower, and then submit the loan to a lender for approval.
The loan origination fee paid to a mortgage broker is often calculated as a percentage of the total amount of the loan. Part of a mortgage broker's job is to “do the math and tell the borrower how much of the mortgage they might qualify for,” says Rick Masnyk, branch manager for Network Funding in North Smithfield, Rhode Island. Some brokers charge directly to the borrower, rather than to the lender; in these cases, this is usually a fixed rate that can be financed with the mortgage or paid at closing. The broker communicates with both the borrower and lender throughout the transaction until closing. Before you commit to working with a broker, ask about their commission structure and how much you might be responsible for paying, if any. It is important to verify your broker's credentials by consulting the & Registry (NMLS) database of the National Multistate Licensing System. Mortgage brokers don't lend money or create mortgages; instead they help homebuyers search for the right loan product from multiple lenders.
Whether a prospective borrower is buying a new home or refinancing, a broker compiles loan options from several lenders for them to consider and qualify them for a mortgage with those lenders at the same time. Once agreed upon, the mortgage funds are lent in the name of the mortgage lender, and the broker charges them a fee called an opening fee as compensation for their services. Working with professionals like a mortgage broker who can make getting a mortgage as simple as possible is important; however, focusing on your financial health and monitoring your credit report and credit score for free with Experian can ensure that you'll be in good shape when your dream home comes on the market.