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Mortgage brokers: What they do and how much they cost

Yahoo Personal Finance· Getty Images
Aly J. Yale
·Freelance writer
Updated 4 min read

When you get a mortgage, you can go about it one of two ways: Shop around for a mortgage lender and loan yourself, or bring in a mortgage broker who can do the shopping for you.

Both strategies have merits, and the right choice depends on your home-buying goals, how much help you need, the time and resources you have to devote to comparison shopping, and more.

Are you about to start hunting for a mortgage? Here’s how to know whether to use a mortgage broker in your search.

Read more: Everything first-time home buyers should know

In this article:

A mortgage broker is a professional who helps you find a lender. They can help you compare mortgage lenders and loan options, analyze fees and interest rates, and determine the best fit for your needs and budget. They can also assist you with the application process.

Mortgage brokers are different from mortgage lenders and loan officers. Lenders are the companies that actually loan you the money, and loan officers work directly for those lenders. Mortgage brokers, on the other hand, are independent. They have access to home loan products from various lenders rather than just one.

Mortgage brokers' pay varies. Some get a salary if they work for a larger brokerage company, while others get commissions based on the loans they close. Some have a salary-plus-commissions payment model.

These commissions are often paid by the lender you choose to work with or, in some cases, by you as the borrower. This typically ranges from 0.5% to 2% of the total loan amount. On a $300,000 mortgage, this would cost $1,500 to $6,000.

Mortgage brokers aren’t right for everyone, but they can be a smart choice for some borrowers. Here’s what to consider before using a mortgage broker yourself.

  • Access to more types of mortgage products. This can help if you are worried about qualifying for a common mortgage type, such as a conventional or FHA loan, or are a non-traditional income earner.

  • Potentially lower rates and fees. A broker can help you compare many options and even negotiate with potential lenders on your behalf to ensure you get the lowest-cost loan.

  • Professional guidance along the way. Brokers don’t just help you find the best loan; they can also assist with your application and documentation, communicate with your lender, and attend closing with you.

  • Less time-consuming loan process. With a broker on your side, it means less legwork for you.

  • You may owe a fee. Many brokers are paid by the mortgage lender, but that’s not always the case.

  • You could be steered toward certain loan products. If a lender offers higher commissions than another, your broker may be tempted to steer you to their mortgages rather than a better-suited option.

  • You may not have access to certain lenders. Some lenders don’t work with brokers, and others may limit which competitors a broker can work with. So, you might not have access to the full scope of lenders you would on your own.

Read more: Best mortgage lenders for first-time home buyers

A mortgage broker can be a good fit if you’re short on bandwidth and want someone else to do the heavy lifting when it comes to loan shopping. It may also be wise if you’re new to the mortgage process and want a little more hand-holding along the way.

Mortgage brokers can also be a good resource if you’re worried about qualifying for a loan — they may know lenders that have looser qualifying requirements — or if you’re a non-traditional borrower, such as a freelancer, small business owner, or just someone who earns your money in another, non-W2 sort of way. In this case, they may have access to specialized lenders and loan products that are more suited to your situation but aren’t as widely known.

Learn more: How non-qualified mortgages work

You may be able to find a mortgage broker by asking your friends and family for recommendations. Your real estate agent may also have connections to local brokers.

If not, you can look at online mortgage broker directories, including those offered by Mortgage Matchup or Rocket Mortgage. Just make sure to read reviews and check their licensing before reaching out.

A mortgage broker has access to many lenders and loan options and helps you shop for the best one. They can also assist with your loan application and guide you through the entire lending process.

Many mortgage brokers are paid a commission, either from the borrower or the lender the borrower chooses to work with. Some brokers may be paid a salary or a salary plus commissions.

A mortgage broker may be worth it if you need help choosing a type of loan or loan term length, are worried about qualifying for a mortgage, are a non-traditional borrower, or just want guidance throughout the loan process.

This article was edited by Laura Grace Tarpley.