If you have started looking into home loans, you may have heard about mortgage brokers. Here is a plain explanation of what they do and how they differ from a bank.
What a mortgage broker does
A mortgage broker is a licensed professional who helps you find and apply for a home loan. A broker does not lend its own money. Instead, it works with a number of lenders and can request pricing and loan options from several of them for you. In California, mortgage brokers are licensed and are identified by licensing numbers, such as an NMLS ID and a DRE license number, which you can verify online.
Broker vs. bank
- A bank or direct lender offers only its own loan programs.
- A broker can work with multiple lenders, which can give you more programs to compare.
- Either way, compare the Loan Estimate, the APR, and the fees.
How a broker can help
- Access to several lenders and programs through a single application
- Help comparing rates, fees and terms
- Guidance for borrowers who are self-employed or have less common income or property types
- Coordination with the lender, the agent and the title company until closing
A broker may be able to find options that fit your situation, but results vary and no one can promise the lowest rate or an approval.
How brokers are paid
Brokers are paid for their work, either by the lender or by the borrower, and the arrangement must be disclosed to you. The rules do not allow a broker to be paid both ways on the same loan. Ask upfront how your broker will be paid, and look for it on your Loan Estimate. Do not assume it costs nothing.
What to ask before you choose
- What are your license numbers, and where can I verify them?
- How are you paid on my loan?
- Which lenders do you work with?
- What are the total costs, including fees and points?
- What is your estimated timeline?
How the process usually goes
- A first conversation about your goals, budget and finances
- An application with income, asset and credit information
- Loan options and comparison of Loan Estimates
- Processing, underwriting and closing
Every borrower is different. If you would like to talk through your own situation, the MonaLending team is happy to help.
