What Is a Mortgage Broker and What Do They Do?

Using a mortgage broker to help you navigate today’s lending landscape is the one way to secure a home loan that meets your financial circumstances. Mortgage brokers connect borrowers with lenders and help with the mortgage loan process from start to finish, which may save you a lot of time and effort.

Learn more about what a mortgage loan broker does and how their services differ from other mortgage loan service providers.

What is a mortgage broker?

A mortgage broker works as an intermediary between homebuyers and mortgage lenders. Whether you’re buying a home or refinancing an existing loan, a mortgage broker is someone who can guide you through the home buying process. They’ll also offer knowledgeable advice and help you find the competitive rates based on your financial situation and information. 

From pre-approval to closing, mortgage brokers work with everyone participating in the home loan process. Mortgage brokers are independently licensed professionals who work with and  have access to a large pool of lenders, including: 

• Commercial banks
• Credit unions
• Mortgage companies
• Other financial institutions

Sifting through multiple lenders and finding the right mortgage loan can save home buyers a ton of time and money.

What does a mortgage broker do?

The primary role of a mortgage broker is to simplify the mortgage process for homebuyers. Mortgage brokers have extensive knowledge of the lending landscape and real estate market. They leverage their expertise and industry connections to connect borrowers with the right mortgage lenders. They can support home buyers with everything from mortgage loan options to interest rates and lender requirements. 

Mortgage brokers also take on critical responsibilities on the borrower’s behalf, which typically includes:

Assess your loan qualifications 

Mortgage brokers analyze a home buyer’s income, credit score, assets and liabilities to determine their eligibility for various mortgage loans and programs.

Refer mortgage lenders 

According to a 2023 Zillow study, 66% of mortgage buyers reported using a referral from a real estate agent, realtor or broker when looking at financing options. Mortgage brokers will contact multiple lenders within their network to find the most suitable referral for your unique financial situation. They’ll also compare fees and loan terms to ensure you’re connected with the best lender and get the best deal based on your financial situation and individual requirements.

Guide you through the mortgage application process 

Mortgage brokers guide new homebuyers through the process of completing and filing a mortgage loan application. They work to ensure all the necessary documentation is correct before submitting, communicate with lenders on the home buyer’s behalf, and address any concerns or issues that may arise.

Explain loan terms and legal disclosures

The mortgage process is often complex and challenging. Mortgage brokers take the time to explain important details regarding loan terms and legal implications to ensure homebuyers understand the requirements and conditions of their new mortgage loan.

Coordinate with real estate professionals on your behalf

Lastly, mortgage brokers will coordinate with everyone involved in the home buying process, including real estate agents, appraisers, title companies and mortgage lenders, to ensure everything goes smoothly. 

A mortgage loan broker has a fiduciary responsibility to the home buyer they work with. This means that when you work with a mortgage broker, they must act in your best interest — not the lender’s.

Mortgage brokers vs. mortgage lenders vs. loan officers: What’s the difference?

It’s easy to confuse mortgage brokers with mortgage lenders and loan officers. However, some critical differences exist among the three financial entities offering mortgage services.

Mortgage brokers

Mortgage brokers work to connect homebuyers with the lenders most suitable for their financial circumstances. They typically partner with a broad range of lenders, working either for a mortgage brokerage firm or as an independent entity. 

A mortgage broker’s services are also optional. While homebuyers can find a lender and reasonable mortgage rates on their own, mortgage brokers are beneficial to the process thanks to their lender relationships, knowledge and expertise.

Mortgage lenders

A mortgage lender is a financial institution, such as a commercial bank or a credit union.

Many lenders underwrite and originate all types of loans, including home loans. Loan origination  refers to the entire process of assessing and approving a potential borrower’s application to determine their risk through the underwriting process that includes analysis of an applicant’s debt and income stability. 

Home buyers can visit multiple mortgage lenders to compare their loan options and find the best interest rates and loan terms that suit their specific needs.

Loan officers

A loan officer is a person who works on behalf of the mortgage lender. They will assist with the underwriting process for mortgage approval. They are able to do so by providing relevant loan scenarios for an applicant’s evaluation, and ensuring required documentation is provided that will assist the mortgage lender’s underwriting staff review loan eligibility, including a potential borrower’s credit history and loan-to-value ratio (LTV), to determine whether loan criteria can be met. 

They’re also responsible for providing support and guidance through the loan application and closing process.

The pros and cons of working with a mortgage broker

As with any service, weighing the pros and cons of working with a mortgage broker is essential.

The pros of a mortgage brokerage include:

They know ways to save money

Mortgage brokers may be able to negotiate with lenders to waive common fees, such as origination, appraisal, and even application fees. They can also negotiate on the borrower’s behalf to get the overall best deal possible based on an individual’s financial situation and circumstances.

They save you time

A mortgage broker will do the legwork and leverage their connections with multiple lenders to bring homebuyers the best loan options. They can also submit the required paperwork and monitor the application process on the home buyer’s behalf. 

They can work with different credit scores

An experienced mortgage broker knows how to approach unique financial situations. They have the expertise and experience to support homebuyers with all types of credit scores. This gives homebuyers a better chance of finding the right mortgage for their financial circumstances.

The cons of working with a mortgage broker:

Broker fees 

Mortgage brokers typically make money through broker or loan origination fees that range from 0.5% to 2.75% of the total mortgage amount. While it is common for the lender to cover the fee, the borrower sometimes assumes the cost. Be sure to ask the mortgage broker about their fee structure before working with them to determine who absorbs the final cost. 

Referrals are limited to their network availability

There are a lot of mortgage lenders out there. Keep in mind that not every mortgage broker has access to the same financial institutions or loan programs. The extent of a mortgage broker’s network will vary from firm-to-firm. Remember, you can always ask friends and family for referrals as well as research mortgage lenders online. 

Brokers can’t guarantee you the best deal

While working with a broker means they’ll do a lot of the legwork for you, it’s important to know that working with a broker doesn’t guarantee you’ll get the best possible loan terms. 

Should I use a mortgage broker?

Mortgage brokers can be beneficial for homebuyers who:

• Don’t have an existing relationship with a bank, credit union, or other financial institution
• Need help understanding their loan options, the loan process, and compiling the necessary documentation for the loan application

Homebuyers who have an existing relationship with a lender or are familiar with the mortgage loan process can still benefit from the help of a mortgage broker. The lending landscape is constantly evolving, and mortgage brokers may be among the first to know about any new trends or official changes.

How to find a mortgage broker

If you’re unsure as to how to find a mortgage broker, you’ll want to begin your search by:

• Getting a referral from your real estate agent
• Asking friends and family who have experience working with a mortgage broker for a recommendation
• Looking through online directories and reading reviews

It’s also a good idea to make a list of several mortgage brokers, so you can compare them and see who will offer you the best options and most support. To compare mortgage brokers, you’ll want to ask the following questions:

What is your mortgage fee structure?

Mortgage brokers are legally bound to disclose their brokerage fee structure upfront. This means they must explain who assumes the cost and at what percentage of the total loan amount. 

If the homebuyer is to assume the cost, they should also explain the payment options. For example, if the broker requires that you pay the fee, you’ll likely have the option to pay it upfront or include it in the overall loan amount.

What type of borrowers do you work with?

Finding a mortgage broker that can work with your specific financial situation is essential. This ensures they don’t connect you with a lender that doesn’t suit your needs and only point you toward the right loan products. They can also offer sound advice on saving money through the mortgage process. 

Which lenders are in your brokerage network?

While there’s plenty of overlap, most mortgage brokers vary in which lenders they work with. Therefore, the mortgage products they can offer you will also vary. 

It's best to find a mortgage broker with access to a wide range of lenders and mortgage products. You may have to do some extra research regarding loan types to help narrow your broker choices, but it’ll pay off in the long run when you find the best mortgage for your financial circumstances.

Working with a mortgage broker is an excellent way to simplify the home loan process. Not only will a mortgage broker connect you with a suitable lender, but they’ll also work to ensure you have the necessary support until you close on your new home.