Mortgage Broker Credit Information

The ins and outs of being a mortgage broker.

Mortgage brokers perform an important role in a real estate transaction, but this role can sometimes seem confusing. More important, perhaps, mortgage brokers do not typically provide the loan to a potential home buyer. Instead, mortgage brokers "broker" the loan by acting as the middle-man between the buyer and the lender. Mortgage brokers are often willing to locate lenders for buyers, but they do not provide the loan itself. Nevertheless, brokers are actively engaged in the loan process, and as a result a buyer's credit will be as important to the broker as it will be to the buyer.

The Facts

Mortgage brokers are primarily responsible for working on behalf of the buyer and the lender. With this role, the broker is often responsible for locating specific lenders and loan options for the buyer -- at the buyer's request. When this occurs, the mortgage broker will need to know the details about the buyer's credit to create a list of available options. Credit score and credit history play a significant role in whether a lender will offer a loan to a buyer, so mortgage brokers must take this into account.

Significance

Mortgage brokers review potential home buyers and more or less "field" them for lenders. When a buyer requests that the broker locate a lender or a range of possible lenders, the broker will begin by looking at the buyer's situation. In reviewing the buyer, the broker must research a variety of financial details to ensure that the right lenders are selected and that the real estate transaction may proceed.

Benefits

Some buyers arrive at a potential real estate transaction with a selected lender, a pre-approval for a certain amount and a locked-in rate. Other buyers begin the home-buying process with little more than an idea that they are looking for a certain type of property. For these types of buyers, mortgage brokers play a valuable role. Where the buyer might be overwhelmed by the complexity of mortgages and lenders, the broker can step in, review the buyer's credit situation and provide a great starting place for acquiring the right loan.

Considerations

Not surprisingly, mortgage brokers do not work for free, and in most cases brokers earn a percentage of the transaction. This means that finding the best rate for the home buyer is not always in the best financial interests of the mortgage broker. As a result, home buyers should review the provided information carefully to ensure that they too are getting the best deal possible.

Expert Insight

Real estate experts suggest that home buyers consider contacting more than one mortgage broker. Additionally, experts remind buyers that they are not required to accept what the broker brings them. Home buyers can begin a negotiation process with the broker just as they can begin a negotiation process with the home seller. Finally, real estate analysts warn that buyers look closely at the fine print. In some cases, the broker's fee can be added to the interest that the buyer pays. This creates extra expense for the buyer in the long run, so it is important to know how the broker is being paid.

References

• Federal Reserve: Mortgage Brokers