Mortgage brokers are lending industry professionals who help individuals to agree the terms of a loan with a lender. A mortgage broker fee is a commission paid by the borrower to the person who brokered the loan. The broker typically receives this fee during or immediately after the loan closing. Broker fees, like most other mortgage related fees, are usually charged as a percentage of the total loan amount.
Interest rates on mortgages are largely based on the average interest rates paid on national bonds or the interest rates that central banks charge lenders to borrow money. Rates are generally consistent, but some lenders offer mortgages with below average interest rates in order to entice customers from other lenders. People looking for mortgages can shop around for the best rates available locally or look at the interest rates available through online lenders. Mortgage brokers liaise with lenders from around the nation on a regular basis and are able to help borrowers quickly identify the best rates.
Lenders typically charge borrowers a commission known as an origination fee. The origination fee covers the commission paid to the loan officer who processed the loan application as well as costs incurred by the lender. Some lenders agree to cover the mortgage broker fee with the proceeds from the origination fee. This means the borrower's overall costs are not increased as a result of working with a broker rather than dealing with the lender directly.
Major lenders often price loans that are sold through brokers differently from loans that borrowers obtain directly from the lender. Brokered loans often have lower interest rates, but the lender makes up for the lack of interest income by charging higher upfront fees. These upfront fees include both the lender's origination fee and a separate mortgage broker fee. Including both the broker’s fee and the origination fee in the closing costs of the loan means that the lender does not have to find separate funds to cover the loan officer’s commission.
People with good credit can usually find low interest rates on loans without having to employ a broker. Borrowers with poor credit or people trying to finance properties that do not meet standard bank underwriting guidelines often benefit from hiring brokers because brokers usually work with lenders that are willing to offer loan terms to people who do not qualify for conventional loans. Paying a mortgage broker fee enables borrowers with unconventional needs to obtain financing more quickly.