You’ve probably heard the term “mortgage broker” from your real estate agent or friends who have bought a home. But what is a mortgage broker and what do you do that is different from, say, a loan officer in a bank?

Here are answers to common questions about working with mortgage brokers.

A mortgage broker acts as an intermediary between you and potential lenders. The broker’s job is to compare mortgage lenders on your behalf and find interest rates that meet your needs. Mortgage brokers have stables of lenders they work with, which can make your life easier.

Mortgage brokers are licensed and regulated financial professionals who do a lot of the groundwork. They collect documents from you, pull your credit history, and verify your income and employment, using the information to help you apply for loans and negotiate terms within a short period of time.

Once you’ve settled on a loan and a lender that works best for you, your mortgage broker will work with the bank’s underwriting department, the closing agent (usually the title company), and your real estate agent to ensure that the transaction proceeds correctly until the closing day.

Mortgage brokers are most often paid by lenders, sometimes by borrowers, but by law never both. This law – the Dodd-Frank law – also prohibits mortgage brokers from charging hidden fees or basing their compensation on a borrower’s interest rate.

You can also choose to pay the mortgage broker yourself. This is called “borrower paid compensation”.

Borrowers are encouraged to shop around for mortgage brokers and should ask how much they can expect to pay in fees, which are typically 1% to 2% of the loan amount.

The competitiveness – and home prices – of your market will have a role to play in determining the fees charged by mortgage brokers. Federal law limits the amount of compensation.

Loan officers are employees of a lender who receive fixed salaries (plus bonuses). Loan officers can only write the types of loans their employer chooses to offer.

Mortgage brokers, who may work in a mortgage brokerage firm or independently, deal with many lenders to find loans for their clients. Mortgage brokers may be able to give borrowers access to a wide selection of loan types.

You can save time by using a mortgage broker; it can take hours to apply for pre-approval from different lenders, and then there is a back and forth between taking out the loan and ensuring that the deal stays on track. A mortgage broker can save you the hassle of managing this process.

But when choosing a lender – whether through a broker or directly – you’ll want to be careful about the lender’s fees. Specifically, ask what charges will appear on page 2 of your Loan estimate form in the Loan Costs section under “A: Original Fees”.

Then take the loan estimate you get from each lender, place them side by side, and compare your interest rate and all closing costs and costs.

This direct comparison between different options is the best way to make the right choice in one of the most important purchases of your life.

The best way is to ask for referrals from friends and relatives, but make sure they have actually used the broker and aren’t just dropping the name of a former college roommate or college roommate. distant knowledge.

Learn all you can about the broker’s services, his communication style, his level of knowledge and his approach to clients.

Another source of reference: your real estate agent. Ask your agent for the names of a few brokers they have worked with and who they trust. Some real estate companies offer an in-house mortgage broker as part of their service package, but you don’t have to use that company or person.

Finding the right mortgage broker is like choose the best mortgage lender: It’s wise to interview at least three people to find out what services they offer, what experience they have, and how they can help streamline the process.

Check your state’s professional licensing authority to make sure they have mortgage broker licenses in good standing.

Also read reviews online and check with the Better Business Bureau to determine if the broker you are considering has a good reputation.