What Is a Mortgage Broker? Are They Worth It?

Written by Kim PinnelliReviewed by Nathan Brown, CFP®Updated: 20th Jul 2022
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If you’re looking for the best mortgage at the lowest rate, work with a mortgage broker. The right broker will work on your behalf to find you the best mortgage and you won’t have to do any legwork.

Here’s my review of a mortgage broker and why you should consider one.

What Is a Mortgage Broker?

A mortgage broker is a middleman between you and the mortgage lender. The mortgage broker does all the leg work to find you the perfect mortgage but doesn’t do the underwriting or funding of the loan.

Mortgage brokers work with hundreds of lenders to make shopping around for a mortgage a lot easier. Mortgage brokers must be licensed financial professionals, and they work on your behalf to find you the best mortgage for your situation.

>> More: Best Online Mortgage Lenders

What Does a Mortgage Broker Do?

A mortgage broker works with you as a lender would, but without being the lender. Think of when youapply for a mortgage with a lender – you work with a loan officer who communicates with the underwriter to determine what you need to close your loan.

A mortgage broker is the loan officer, but they work with hundreds of lenders, not just one. When you complete a loan application with the mortgage broker, they use the information to determine which lender or lenders they will send your information to so you can get the best loan.

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How Mortgage Brokers Work

All communication you have is with your mortgage broker, not the lender. This could be seen as a ‘downside’ to working with a mortgage broker, but when you work with a reputable broker, you get the same great service.

Mortgage brokers work closely with their partner lenders, so they know what the lender will and will not accept. This makes it easier for the broker to advise you on which lenders would be a good fit for you and which wouldn’t.

Because mortgage brokers aren’t limited to certain mortgage programs like would happen if you went direct to the lender, you don’t have to worry about being pushed into a loan you don’t want or isn’t in your best interest. Brokers have hundreds of options to look at when fitting you into the perfect loan.

>> More: How to Choose the Best Mortgage

How Does a Mortgage Broker Get Paid?

Mortgage brokers get paid by EITHER, the lender or the borrower but never both – it’s the law. If the lender pays the broker, it’s a commission based on your loan amount and interest rate.

The lender discloses the fee they’ll pay the broker upfront, and the broker must disclose it to you too, so you are aware.

If you choose to pay the broker yourself, you can pay a broker-paid commission which is a percentage of your loan amount. You can work out the fees with the broker, but the lender must not compensate them.

On average, mortgage brokers earn 1% – 2% of the loan amount, but it can vary by situation and location.

Mortgage Brokers vs. Mortgage Loan Officers

Mortgage brokers and loan officers have a lot in common – they both work directly with the borrower to fit them into a loan. The similarities end there, though.

A loan officer works directly with a lender. The mortgage loan officer only has the specific loan programs offered by the lender to give a borrower.

If the loan officer can’t fit the borrower into a loan offered at the lender, they lose the loan. This is why some people end up in loans that they didn’t want, but it was the only option the lender had.

A mortgage broker works with hundreds of lenders and has many more options for each borrower. If one lender doesn’t offer a loan program suitable for you, the broker can look elsewhere and not lose your business.

>> More: What Is a Mortgage Loan Originator?

How Do I Find a Mortgage Broker?

You can find a mortgage broker in many ways, but I suggest asking friends or family for referrals. Work with someone who worked with someone you know and trust already.

While mortgage brokers are highly regulated, they are dealing with one of your largest investments, and one wrong decision could ruin you financially.

If you don’t know anyone who recently used a mortgage broker, scour the internet, and read reviews.

You can also mortgage brokers for referrals, contacting them yourself to ask how the process went and if they are happy with the outcome.

How Do I Choose a Mortgage Broker?

#1. Research All Options

Before you work with a broker, research your options. Look for brokers specializing in your situation if you are self-employed, have a recent BK, or have other unique circumstances. Working with a broker experienced in your situation will usually yield the best results.

#2. Ask for Referrals

Don’t be afraid to ask a broker for referrals. If they aren’t willing to give you names of clients they’ve helped before, consider it a red flag, and look elsewhere.

#3. Understand the Fees & Services

Mortgage brokers must be transparent with the fees and the services they provide. Ask a broker up front how they get compensated and what they may charge you, if anything.

Ask about any commitment fees, application fees, or any other fees they charge and compare it to what other brokers in the area offer.

#4. Interview Potential Mortgage Brokers

There’s nothing wrong with interviewing potential mortgage brokers. Use this time to determine if you ‘click.’ Remember, your mortgage broker has your ability to buy a home in their hands.

Working with someone you don’t click with or who doesn’t understand your situation may not work in your favor. Interview at least three brokers to find the one that’s right for you.

Common questions to ask a mortgage broker include:

  • How quickly do you close loans?
  • How many loans do you close a year?
  • What lenders do you work with?
  • Do you work with borrowers in my situation (self-employed, low credit score, etc.)?

What Are the Advantages of Mortgage Brokers?

  • You have access to many more loan programs
  • You may find loans with lower fees and/or better rates
  • You’ll spend much less time searching for the perfect loan
  • Mortgage brokers work on your behalf

What Are the Disadvantages of Mortgage Brokers?

  • Some brokers work only with select lenders
  • If you have a unique situation, a mortgage broker may not have suitable options
  • Mortgage brokers work with a lot of clients, so it can be hard to get personalized service

Is It Safe to Use a Mortgage Broker?

It’s safe to use a mortgage broker as long as they are properly licensed in your state and rate well with the Better Business Bureau.

Use the internet to your advantage and do your research on a mortgage broker before trusting them with your personal information.

When Should You Use a Mortgage Broker?

Anyone can use a mortgage broker, but if you have a unique situation or want multiple quotes, your best bet is to use one.

You’ll do a lot less legwork but have a lot more options at your disposal. A mortgage broker works with the lenders in the area or even the nation that handles certain situations. You’ll have a better chance of finding a targeted lender that will work great for you.

Unless you already have a working relationship with a lender or bank and know you’ll qualify for a loan there, you don’t have anything to lose using a mortgage broker.

Bottom Line: What Is a Mortgage Broker?

If you’re in the market for a mortgage, a mortgage broker can give you many options to find the perfect loan.

Like any financial decision, do your research and make sure the broker is licensed, reputable, and works well with others in your situation for the best outcome.

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Kim Pinnelli
Kim Pinnelli

Kim Pinnelli is a Senior Writer, Editor, & Product Analyst with a Bachelor’s Degree in Finance from the University of Illinois at Chicago. She has been a professional financial writer for over 15 years, and has appeared in a myriad of industry leading financial media outlets. Leveraging her personal experience, Kim is committed to helping people take charge of their personal finances and make simple financial decisions.