In almost 95% of cases the services of a mortgage broker are FREE.  The Mortgage Broker is almost always paid a fee or commission directly from the lender.

Brokerage Fees & Compensation:
Mortgage brokers typically do not have to charge you any fees. However, there are times when that may be necessary. Fees are based on the application themselves. Let’s illustrate them below:

1) Finders Fee:  This is the most typical way a mortgage professional gets paid.  A lender will generally pay a mortgage broker a percentage of the mortgage amount as a finders fee.  The amount of the fee can range from 0.5% to 1.5% with the average being about 1%.  For example, if a client borrows $300,000.00 – the mortgage professional would likely receive a gross commission of 1% or $3,000.

2). Lender Fee:  Some lenders charge a fee for the mortgage application.   These lenders usually specialize in borrowers who have bruised credit, or applications that require notable exceptions.  These lenders will charge a fee of 1%-3% and pay the mortgage professional a portion of that fee (usually 50%).

3). Broker Fee:  Sometimes a mortgage broker will need to charge a fee if they are using a private lender or a financial institution that doesn’t have a finders fee agreement with the brokerage.   For example a major bank, credit union, mortgage investment corporation, or private corporation.  These fees are set by the broker and agreed upon by the client.  Typically fees are between 1%-3% and have a minimum of usually $2,500.00.  If a broker/brokerage fee is charged, it will be fully disclosed upfront in writing.

4). Cash Back:  Many lenders have a cashback program for their clients.  Cashback is also how the mortgage professional can receive compensation instead of a lender fee or broker fee.  In this case, the lender will pay the broker 1% of the funded mortgage amount and increase the mortgage rate to the borrower by .2% or .25% depending upon their policy.   The increase in the interest rate is what compensates the broker and is paid over the term of the mortgage. With this type of mortgage, it is important to understand that the mortgage penalty will be higher and may include the cashback portion.

If you would like to know what a mortgage broker can do for you, please contact us today!