You might be curious about how a mortgage broker gets paid. Most consumers believe that they will have more costs associated with getting a mortgage through a broker than going to their bank. Not every broker, and certainly not for every deal mortgage brokers charge a broker fee. The banks pay mortgage brokers a commission or what they refer to as a “finder’s fee.” Most of the time, using a broker is free and benefits you in saving. Saving money on your mortgage involves more than just lowering your interest rate. Your mortgage broker is familiar with features and payment options that might save you more money over time than a lower upfront rate alone.
When you go to the car dealership, you don’t walk in and immediately think, “oh no,” this auto salesman will charge me a fortune for his work; you don’t worry about that because you know that he knows more about those cars than you do and will steer you towards your dream car. Just like a mortgage agent, we will lead you towards your best financial solution. Just like the salesman gets paid from his commission, so do we. Typically, a mortgage broker does not charge an additional fee, although the broker may charge a brokerage fee if the deal is complicated. This fee would be paid to the broker at the closing arranged through the clients’ lawyer.
Mortgage agents work with a wide range of lenders to look for the best available options for each client. Typically, a broker will have cultivated positive relationships with leading lenders and banks to get better offers than what is available on the market without a broker.
Why would a lender pay a broker to get clients instead of hiring in-house staff to do the work? Simply put, the lender would have to hire someone and pay them a salary, benefits, paid vacations, etc. That’s why it makes more sense to have mortgage brokers and agents do all the hard work of finding the clients, gathering their documents, underwriting, and making a smooth closing for the client and just paying brokers commission for the deal. The lenders pay roughly anywhere from 0.5%-1.2% of the mortgage amount as their commission to the broker.
The mortgage broker typically will outline the compensation and the conditions with you before starting the mortgage application process; if this isn’t the case, they will go over it during the signing process. Another thing to remember is that the specialists from the bank are not licensed mortgage brokers/or agents, and they can sell mortgages with no training or experience. On the other hand, mortgage brokers are licensed and must follow the government’s strict rules and guidelines. Not only that, but to keep an active license, you must follow up with courses and complete relicensing when necessary.
If you’re ready to get started with your mortgage journey, please reach out to us for any questions related to fees related to using a mortgage broker. We can help you to get all your mortgage-related inquiries answered. You can reach us at 905-997-7001 or email us at email@example.com to begin your home buying journey.