Should You Work With A Mortgage Broker?

A mortgage broker is a licensed and regulated financial professional who acts as an intermediary between borrowers and lenders. Brokers identify loans that meet borrower needs and then compare rates and terms so the homebuyer doesn’t have to. Mortgage brokers have the ability to offer mortgage products from a network of lenders and provide access to a greater range of products than loan officers, who are limited to their own bank’s offerings.

Mortgage brokers then guide clients through the application and underwriting processes, often by compiling application materials, pulling the borrower’s credit history and verifying income and employment information. Finally, mortgage brokers work with everyone involved in the transaction, including the real estate agent, underwriter and closing agent, to ensure the loan closes on time.

A mortgage broker is a licensed and regulated financial professional who acts as an intermediary between borrowers and lenders. Brokers identify loans that meet borrower needs and then compare rates and terms so the homebuyer doesn’t have to. Mortgage brokers have the ability to offer mortgage products from a network of lenders and provide access to a greater range of products than loan officers, who are limited to their own bank’s offerings.

Mortgage brokers then guide clients through the application and underwriting processes, often by compiling application materials, pulling the borrower’s credit history and verifying income and employment information. Finally, mortgage brokers work with everyone involved in the transaction, including the real estate agent, underwriter and closing agent, to ensure the loan closes on time.

Perhaps you want to buy a house and you don’t have an existing banking relationship or aren’t satisfied with the rate offered by your current mortgage lender. You can call a mortgage broker who works with multiple lenders to help borrowers identify the best loans and rates from a broad range of loan programs.

Using a mortgage broker can also save you a tremendous amount of time. Rather than contacting several lenders individually and poring over complicated loan offers, you simply work with a broker who determines how much loan you’re likely to qualify for and handles all of the legwork for you.

Brokers then help the homebuyer compile the necessary documentation and shepherd them through the application and underwriting process. Upon closing, the mortgage broker earns a commission which is typically paid by the lender of between 0.50% and1.20% of the total loan amount. Occasionally, there are upfront costs, such as a lender or application fee, which may go towards the broker’s commission to the lender to cover administrative costs. Or, if you have difficulty qualifying for a mortgage and have to go with a private or alternative lender, there may be a fee upfront.

Applying for a mortgage can feel like an extremely personal and invasive process, so it’s important to find an experienced broker who makes you feel at ease and who has your best interests at heart. Start the search for a broker early in the home-buying process so you have time to find a broker who can identify the best loan for you and help you through application, underwriting and closing.

1. Ask for Referrals

Start your search for a mortgage broker by contacting your current bank or lending institution. If you don’t already have a banking relationship—or aren’t happy with the terms your existing mortgage lender offered—ask friends and family for referrals. Your real estate agent should also be able to recommend one or two strong candidates with experience in your area.

2. Vet Your Options

Once you compile a list of potential brokers, you can search your province’s regulatory body (for example, in Ontario, that’s the Financial Services Regulatory Authority of Ontario) to ensure your potential broker is authorized to sell. You can also check platforms like the Better Business Bureau, Yelp and Google to see what past clients have to say about each broker.

3. Interview Brokers

The path from mortgage loan application to underwriting and closing can be a long one. It’s important to find a licensed broker who is both experienced and a good communicator. For that reason, you should interview at least three brokers before making a decision. Start with these questions when interviewing prospective mortgage brokers:

• How much experience do you have in the mortgage lending industry?
• What does your application process look like?
• Which lenders do you work with?
• What do you charge, and are fees paid by the borrower or lender?
• What are my chances of getting a mortgage?
• Can you provide any references?

Finally, mortgage brokers work on a commission and may prioritize selling mortgages from lenders that don’t offer the most competitive mortgages. Brokers may also receive other incentives such as volume bonuses, efficiency bonuses or trailer fees that are paid over the term of the mortgage, so it’s important to fully vet both your broker and the loan options they have access to.

Typically,  mortgage brokers are compensated through commissions paid by lenders. The exact amounts of these fees and commissions vary, but generally, brokers can earn between 0.50% and 1.20%of the total loan amount. 

There are multiple variables that may affect the commission rate a broker receives, such as:

• Term length: The longer the fixed term, the higher the commission
• Type of rate: Fixed rates may pay more than variable rates.
• Brokerage size: Large brokers may benefit from higher commissions and/or bonuses because of the larger volumes
• Other incentives: This may include volume bonuses, efficiency bonuses and/or trailer fees that are paid over the term of the mortgage.

• Provide access to more mortgage products than a mortgage banker
• Help reduce or otherwise manage mortgage-related fees
• Simplify the process of finding and vetting loans
• Reduce some of the stress and legwork around shopping for mortgage rates
• Offer insight into how much mortgage a borrower can afford and the likelihood of approval

• Can be biased based on existing relationships with lenders
• Depending on the borrower’s location, it may be difficult to find a reputable local broker
• May not be aligned with your best interests
•  Doesn’t guarantee borrowers the most advantageous deal