Common Questions & Answers
Mortgage brokers represent you––the borrower––in obtaining financing from a variety of lending sources. If mortgage brokers are middlemen between you and the lender, how can they save you money? Don't you have to pay extra for using a mortgage broker?
Independent surveys have shown that mortgage brokers do NOT cost you more than direct lenders. In many cases they even save you money. Mortgage brokers increase competiton in the market place, resulting in lower rates for everyone. Since mortgage brokers obtain their funds from a variety of sources, they allow you to access to a large number of lenders. When you apply for a loan with a mortgage broker, you are effectively applying for loans with all the lenders that mortgage broker is approved with.
Mortgage brokers obtain rates at wholesale, mark up these rates by adding points and then quote you a retail rate. Mortgage brokers are NOT employees of the lender, rather they are independent contractors. Mortgage brokers are free to set their own pricing. Therefore two different mortgage brokers using the same lender can quote you different rates/points! This is because the two brokers may mark up wholesale rates differently.
Why do lenders use mortgage brokers?
- Saves them time and money. The mortgage broker does all the legwork of finding customers, pre-qualifying them and putting together their loan package. As a result, lenders are able to offer discounted pricing to mortgage brokers.
- Alternative to branch offices. Since personal contact with the customer is usually required, a mortgage broker serves as a lender's branch office. This saves the lender tremendous amounts of time and money. Through a network of mortgage brokers, lenders can service a wide number of customers.
- Provide a matching service. Mortgage brokers know what each lender is looking for and submit loans that a particular lender is likely to approve. This saves the lender a lot of time and expense since they approve a higher percentage of loans.
- Mortgage brokers generate about 50% of all loans. Lenders have established wholesale divisions and have account representativeson staff just to service their mortgage brokers. There is a lot of competition amongst wholesale lenders to get broker-generated business.
- Save sales and marketing expense. Mortgage brokers are responsible for all the sales and marketing required to find clients. Lenders in effect have a large sales force with little overhead cost.