What do brokers do? They play a key role in the loan and mortgage process, working with different lenders and negotiating loan terms, always seeking the most competitive rates for the borrower. That means client management involves both lenders and borrowers. The better the relationships, the more successful the broker. Certain digital tools deepen these relationships for all parties involved.
How to Be a Mortgage Broker
The lending process is often complicated. That’s where mortgage brokers step in. They work closely with borrowers, guiding them through the entire lending process. However, their job does not involve loan origination. Instead, they serve in an intermediary position between the lender and borrower. They analyze various mortgage products offered by the lender and advise borrowers on issues like terms, interest rates and qualifying for a mortgage. Brokers do not lend money, but by working with different lenders they can find the best loan for a particular borrower’s needs.
Mortgage bankers, on the other hand, work only for their employer and cannot offer borrowers the opportunity to compare and choose between a variety of lenders.
Becoming a mortgage broker requires a thorough knowledge of the local real estate market, as well as the many types of mortgages available. Since licensure is required, all potential brokers must successfully complete a pre-licensing program covering all applicable federal and state regulations as well as financial laws governing the mortgage industry. They must then take and pass the National Mortgage Licensure System test, each state’s version of which includes its particular regulations and requirements. The mortgage broker can then get to work. Annual continuing education credits are necessary for license maintenance.
How Mortgage Brokers Make Money
Some mortgage brokers work only on commission, while others may receive a salary in addition to commissions. The latter is generally true for those employed by well-established brokerages, while the former are usually independent mortgage brokers.
While either the lender or the borrower might pay the commission, it is never both parties. When the lender pays, it is a certain percentage of the loan amount, generally between 1 and 2 percent, while the borrower pays a direct fee. In either situation, the broker can never receive more than 3 percent of the loan amount, as per federal law. However, in high-value real estate markets, broker fees are lower than in less expensive areas.
Most brokers make their money primarily from lenders. However, without ensuring their borrowers can qualify for the loans with the best terms, rates and monthly payments, the broker will not get paid, because commissions are paid only on transactions that close.
Mortgage brokers not only collaborate with lenders and borrowers, but also work in conjunction with bank underwriters, appraisers, title companies and the borrower’s real estate agent and lawyer. From the borrower, the broker collects all the necessary documentation for the loan, including credit reports, income statements and employment history. After reviewing this information, the broker can give the borrower more options based on their credit score, among other factors.
When it comes to lender collaboration, the mortgage broker works to receive preapproval for the client’s loan. Once approved, the next step — the appraisal process — kicks in. If the appraiser finds the house valued correctly and any other conditions surrounding the property are cleared up, the broker works with the title company to ensure a clear title and closing proceeds.
How ScoreMaster Can Help
A gamified tool like ScoreMaster benefits brokers, lenders, and real estate agents with client management since it allows borrowers to achieve their best possible credit score. This, in turn, facilitates better deals since applications are far more likely to have better scores.
If you are a broker, lender, or real estate agent and want to facilitate good relationships with borrowers, contact ScoreMaster today. By using this gamified system, you can offer better loans to more qualified borrowers. Borrowers receive the most competitive loan after obtaining their best possible credit score. It’s a win-win for all involved.
*Legal Disclaimer – ScoreMaster is a patent-pending educational feature simulating credit utilization’s effect on credit scores via payments or spending. Your results may vary and are not guaranteed.