Q. Why use a mortgage broker?

A. Mortgage brokers represent you—the borrower—in obtaining financing from a variety of lending sources.

Q. If mortgage brokers are middlemen between you and the lender, how can they save you money? Don’t you have to pay extra for using a mortgage broker?

A. Independent surveys have shown that mortgage brokers do NOT cost you more than direct lenders. In many cases they even save you money. Mortgage brokers increase competiton in the market place, resulting in lower rates for everyone. Since mortgage brokers obtain their funds from a variety of sources, they allow you access to a large number of lenders. When you apply for a loan with a mortgage broker you are effectively applying for loans with all the lenders that mortgage broker is approved with. Mortgage brokers obtain rates at wholesale, mark up these rates by adding points and then quote you a retail rate. Mortgage brokers are NOT employees of the lender, rather they are independent contractors. Mortgage brokers are free to set their own pricing. Therefore, two different mortgage brokers using the same lender can quote you different rates/points! This is because the two brokers may mark up wholesale rates differently.

Q. Why do lenders use mortgage brokers?

A. It saves them time and money. The mortgage broker does all the legwork finding customers, pre-qualifying them and putting together their loan package. As a result, lenders are able to offer discounted pricing to mortgage brokers.

Q. How do mortgage brokers set pricing?

A. Remember, mortgage brokers obtain rates at wholesale, mark up these rates by adding points and then quote you a retail rate. It’s that simple! This is similar to what a travel agent does. Travel agents obtain discount pricing as a result of their volume.