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Mortgage Broker - Explained

What is a Mortgage Broker?

Written by Jason Gordon

Updated at April 18th, 2022

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Table of Contents

What is a Mortgage Broker?What does a Mortgage Broker Do?Mortgage Broker vs. Loan Officer

What is a Mortgage Broker?

A mortgage broker refers to an individual who connects mortgage borrowers and mortgage lenders. A mortgage broker finds the perfect fit for the borrowers needs, he links a specific borrower to a mortgage lender that can help them realize their mortgage or refinancing dreams. The services offered by a mortgage broker are in exchange for a commission, this expert collates paperwork fro a borrower and finds a suitable lender that will approve the paperwork and issue the needed mortgage. A mortgage broker is different from a mortgage banker, while a mortgage broker does not use his funds for a mortgage, a mortgage banker finances a mortgage using his funds.

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What does a Mortgage Broker Do?

Typically, a mortgage broker acts as a middleman between a mortgage borrower and a lender, this broker ensures that borrowers are liked to direct lenders who are willing to offer them a mortgage. There are several lenders who offer varieties of mortgage or loans, it is, however, the responsibility of mortgage broker to select the perfect fit for a borrowers needs. The broker also organizes the paperwork of a borrower for securing a loan, this paperwork contains detail of the borrowers income, assets, credit score, and other relevant information. Usually, mortgage brokers undergo loan application process for their clients, they save mortgage borrowers time and energy of going about looking for a lender. After organizing the paperwork of a borrower the mortgage broker submits it to the appropriate lender for approval. These brokers also offer professional advisory services by determining the appropriate loan amount that matches a borrowers credit rating. The mortgage borrower pays a fee to the broker as compensation for the services rendered, this fee of often called an origination fee.

Mortgage Broker vs. Loan Officer

Despite that both a mortgage broker and a loan officer perform similar roles, they work differently. While a loan officer works for a mortgage lender and offers different mortgages belonging to the direct lender, a mortgage broker serves as an intermediary between a mortgage borrower and a mortgage lender. A broker works for no institution and is thereby able to offer different loans belonging to different lenders to borrowers. Oftentimes, a mortgage broker is more interested in helping borrowers find the best direct lender who can offer the needed loan, this service is in exchange for an origination fee. A loan officer works with a bank, a mortgage lender or a financial institution, this officer is paid by the institution that hired him. A mortgage broker, on the other hand, receives payment form borrowers he works for. Borrowers do not pay origination fees to mortgage brokers until they secured the loan for which the broker was hired for. This means the work of a mortgage broker is continuous until the best direct lender is found for a borrower. In addition, some direct lenders work closely with mortgage brokers while large financial institutions execute loans through loan officers.

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