Mortgage Loan Banking

Mortgage brokers have one reason for being: to earn a commission when they get you approved for a mortgage. Almost every licensed mortgage broker works only on commission; very few have jobs where they receive a salary and work only for one particular lender.

When you sit down with a lender, the person who helps you with your original paperwork is not a mortgage broker. He is simply a loan advisor who doesn’t need a license, is probably on commission as well, and can’t offer you much in the way of advice. He merely looks at various charts on his desk to determine current APRs, he can talk about locked in rates and time frames, and he can probably provide information on exactly what type of backup documentation will be needed and when.

Other than that, this loan advisor has little to do with your application other than acting as a contact person and middleman.

A mortgage broker actually doesn’t do much more. He does usually have relationships with multiple financial institutions and will tell you anything he thinks you need to know in order for him to gain your trust in order for him to begin the application process. His goal is to be able to pull your credit report so he can determine how or if he can proceed.

Your goal, aside from being approved for the mortgage you want, is to limit how many companies get to pull your credit report. Each time a mortgage lender asks for your credit report, your FICO score takes a hit. Each time a lender sees that other lenders have pulled your report, they make the assumption that these previous lenders have turned you down. Each time this determination is made, they turn up the heat and increase their internal financial vetting process. This is never to your advantage.

Mortgage brokers have virtually no pull when it comes to whether or not you’ll be approved. They essentially do nothing more than broker a deal. They take your application and decide what lender is most likely to be the one to give you the funds you need and the best possible deal. They are middlemen just like the person who would take your application at a local bank.

Brokers charge some pretty hefty fees, and the amounts are totally discretionary. Since they work for themselves (even under the guise of company names such as “XYZ Mortgage Lenders” and such) they charge whatever they want. But if you ask them up front what their fee is, they will never tell you. They will give you some double talk trying to explain percentages, totals, timelines, and all this. In truth, their fees have nothing to do with the loan amount; they have everything to do with what they want to charge.

Their commission also is not dictated by the lender! Unless they are employed by the lender, which is rarely the case, their fee is paid at closing. Whether they charge $500 or $5,000 as a commission, YOU pay this fee as part of your closing costs. The lender has nothing to do with it.