What Is A Mortgage Broker?

When shopping for a mortgage loan, the home buyer has quite an array of choices. From traditional banks to credit unions to mortgage brokers, there are many places to get a mortgage loan. Some of the most popular places to get a mortgage loan are local banks and mortgage brokers.

There are some similarities between the two lending institutions, but there are some notable differences as well. There is also no hard and fast rule as to which institution can offer the best interest rates and most favorable loan terms on a mortgage. The best mortgage for you will depend on a number of factors, including your credit score, the amount of your down payment, the purchase price of the home and how long you plan to remain in the home.

Mortgage brokers operate much like independent insurance agents in that they have access to many different lenders and many different types of mortgage programs. In some cases, particularly cases in which the borrower has less than perfect credit or there are other special circumstances, a mortgage broker may be able to find a mortgage loan when a bank cannot. Mortgage brokers charge a fee for their services, and they do sometimes receive compensation from lenders. Mortgage brokers are very popular, and they originate a high percentage of all home mortgages.

Mortgage brokers will generally originate and process the mortgage loan, then pass it on to a lender, who often sells it to an investor. These investors in mortgage loans include such institutions as state pension funds, government agencies and mutual funds. In many cases, the knowledge and flexibility of a mortgage broker allows them to move to closing in a faster time frame, as well as getting a better rate.

A mortgage broker is paid through a commission, and therefore the closing costs on a home loan originated through a mortgage broker will generally be higher. As with any other financial decision, be sure to ask lots of questions when shopping for a mortgage broker. Ask how he or she is compensated. Ask about the closing costs. Be sure to get information in writing so you can refer to it later.