Mortgage brokers are just one way to get a mortgage. They usually talk about their ability to shop your mortgage to many different sources instead of the one source the bank has.

Mortgage Broker Definition

A mortgage broker is the middle man between you and a wholesale source that funds or provides the money for your mortgage. The wholesale source is called a wholesale lender. The mortgage broker brings you and the wholesale lender together. You need money for a mortgage and the wholesale lender has money to lend.

A mortgage broker has to apply and get approved with a wholesale lender before they can use that lender. Not every wholesale lender is the same. Some are picky in which brokers they approve and others let almost anyone in.

All mortgage broker fees are disclosed on the HUD1 closing statement. Total mortgage broker income is derived most commonly from a combination of the origination fee and yield spread premium. Sometimes brokers will list the origination fee (usually 1% of the loan amount) as a “Mortgage Broker Fee”. You should never be charged both an origination and a mortgage broker fee.

The origination fee and yield spread premium are the main sources of mortgage broker income. Other fees can go to the mortgage broker on the closing statement but those are usually for services the broker owes on your behalf. For example, the appraisal fee has to be paid upfront by the broker so when you mortgage closes they get reimbursed for that fee. If there are fees you do not understand, ask for the invoice.

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