How To Become A Mortgage Broker Frequently Asked Questions

What Is a Mortgage Broker?  A mortgage broker is a middleman between the borrower and the lender. Mortgage brokers work directly with both the consumer and lender to help borrowers qualify and meet all the conditions of the lender to complete a mortgage loan.

Borrower <— ((Intermediary (You)= Mortgage Broker))—> Mortgage Lender/ Bank

Why would someone use a mortgage broker? Many Realtors recommend their buyers use a mortgage broker because of the speed and efficiency of using a mortgage broker compared to using a banker. In addition, many borrowers search out a mortgage broker when they are not finding the terms needed or they desire by their local banker. Mortgage brokers provide value to borrowers by providing different mortgage programs from a nationwide network of mortgage lenders. But the key advantage of a mortgage broker is the ability to shop the entire untied states network of banks and lenders simultaneously to find the consumer lowest rate and/or the best loan programs. Mortgage brokers have access to many programs you will not find at a local bank. Including but not limited to FHA, VA, and Conventional, bad credit, no credit and many more loan programs the local bank would never consider. Mortgage broker’s work with borrowers throughout the entire loan process to satisfy the lenders conditions until the loan is closed. In general, mortgage broker are a lot more available than bank tellers at retail banks, since they work with fewer borrowers mortgage brokers tend to provide a more personal service. This is another big advantage of working with a mortgage broker over a retail bank. If you decide to go with one of the big banks, you may spend most of your time on hold waiting to get in touch with a representative. Additionally, bank tellers are nowhere near as versed in the qualifications or options available for financing as a mortgage broker. Additionally, if your loan is declined, that’s it, done deal. But with a with a mortgage broker, they’d simply submit the loan  at another bank for approval.

How much money can I make as a mortgage broker? As a mortgage broker you can make as little or as much as you wish. As an independent contractor you can gross anywhere between 2.0 -2.75% per loan. For example on a  250,000 loan x 2.75% = $6875.00 gross commission. Of course some make more and some make less.

How exactly do I get paid and much can I make per loan? As a mortgage broker usually can make between 2- 3% of the total loan amount. Mortgage brokers make money just like the bank by charging either an upfront fee to the borrower called a loan origination fee or a yield spread premium. The  yield spread premium is paid to the mortgage broker by the lender by slightly increasing the borrowers interest rate. This fee a no upfront cost to the borrower by utilizing a lender credit to pay the mortgage broker fee. On a lender paid comp plan the mortgage broker will raise the interest rate  to cover the mortgage brokers fees and eliminate any upfront out-of-pocket cost for the borrower. The yield spread premium is the most common way mortgage brokers are paid.

Do mortgage brokers cost the borrower more? No, as a result of the mortgage brokers low overhead compared to a bank mortgage brokers can offer competitive rates that meet or beat those of retail banks, so they are to be considered alongside banks when searching for a mortgage. Mortgage brokers have the ability to shop numerous lenders at once so they can find the best pricing based on the borrowers needs.

So how does the mortgage broker process work? When a borrower makes contact with a mortgage broker and the borrower agrees to work with the broker, the broker will take a mortgage application and pull a credit report using loan origination program. If the mortgage broker feels can fit the borrower into a loan program the mortgage broker will collect information to verify the borrower’s application. To verify the borrowers application is correct the mortgage broker will collection documentation that includes a drivers license, last 2 years tax returns, last 30 days pay stubs, the last 2 months bank statements. After all the paperwork is matched to the mortgage application, the mortgage broker will work on behalf of the borrower to find a mortgage program at the best mortgage rates available. Moreover, If there mortgage broker determines the borrower is qualified the mortgage broker will issue a pre approval letter. Or, on a refinance the mortgage broker will submit the loan application with documentation to the lender for approval. A retail bank would collect the same documentation as a mortgage broker. When the loan is approved the mortgage broker will communicate with both the bank and the borrower and order the appraisal, title search, and collection any other documentation the lender requires to complete a mortgage.

Are mortgage brokers regulated? Yes, mortgage brokers are regulated on both the federal and state level, and must comply with a large number of rules to conduct business.  Additionally, consumers are able to look up broker records via the NMLS to ensure they are authorized to conduct business in their state, and to see if any actions have been taken against the mortgage broker in the past.

What is the NMLS? The NMLS is the system of record for non depository financial services. The NMLS is the official system for companies and individuals seeking to apply, renew and surrender license authorities managed through NMLS by 61 state or territorial government agencies. The NMLS does not grant or deny licenses.

According to NMLS a Mortgage Broker License- This license is required for an entity conducting loan originator activities through one or more licensed loan originators employed by the mortgage broker or as independent contractors to the mortgage broker. 

Do I have to be licenses to be a mortgage broker?  While licensing requirements do vary by states, mortgage brokers must be licensed and complete a criminal background check including finger printing.  Credit checks and a state required exam is required. Click on your state below to view state licensing requirements by state.