Since there are no rules about how mortgage brokers get paid, it is important to remember that they can charge whatever they want for their services. Since the number of brokers in the residential real estate market has steadily grown to the point where it is impossible to count them all, a number of unofficial industry standards have formed that tell brokers how and what to charge.
Who pays the middlemen? Mortgage brokers get paid from a number of places, but the borrower and the lender pay them the most. Since the broker's job is to act as a go-between for the lender and the borrower, he has the right to get paid for his work. The borrower will pay the broker for helping them fill out and send in the loan application paperwork, negotiating with the lenders for the best possible rates and contract terms, and being an independent resource for any questions or concerns. The lender will also pay the broker for helping the borrower with paperwork, answering all questions and concerns, and negotiating with the borrower.
The borrower will pay the broker cash for the loan application paperwork and points for other services. This amount will be paid at settlement and added to closing costs. The lender will pay the broker a flat commission for bringing in new clients, plus something called a Yield Spread Premium, which is the difference between the interest rate the lender wanted and the one the broker got the borrower to accept.
Paid to Broker Points A point is equal to 1% of the total loan amount, and different brokers will charge different amounts of points, usually based on how complicated your loan is. Points paid directly to the lender in exchange for a lower interest rate are different from the points charged by brokers for their services (called Discount Points).
Working with a mortgage broker can add a lot of costs and worries about the cost and quality of a loan. This is not hard to see. The vast majority of residential mortgage applications are made through brokers right now. This gives buyers a very attractive option, as long as the broker and his agency are reputable and have a lot of experience.
