Mortgage companies choose to pay their brokers in a variety of ways. Some mortgage brokers receive salaries based on their experience and performance. Others receive a percent of the mortgages they lend to clients. Understanding how mortgage brokers get paid could help you choose a professional who meets your needs best.
Front-End and Back-End Compensation
Most mortgage brokers get paid through commission Mortgage Brokers in Canary Wharf. That means they get a small piece of the mortgages they sell to clients.
There are, however, two primary ways for mortgage brokers to get paid through commission.
Front-end compensation uses various fees to make sure the broker gets paid. These fees come directly from the borrower. In fact, borrowers can ask for itemized lists showing what fees they have to pay the broker. A professional shouldn’t balk at such a request. It’s perfectly reasonable for borrowers to want to know where their money goes.
Some of the fees that pay the broker are called:
- warehouse fee
- processing fee
- origination fee
- underwriting fee
These are the fees that mortgage brokers commonly refer to as “points.” They may have different names from those listed above, but they still pay the broker for his or her work.
Back-end compensation comes from the lender, not the borrower.
The compensation’s amount usually depends on the mortgage’s interest rate. Essentially, lenders give brokers access to their products at discounted rates. The brokers then negotiate with the borrower to get the highest rate possible. Once the deal has been made, the lender pays the mortgage broker the difference between the final interest rate and the original.
To make this a little easier to understand, imagine a bank that gives brokers access to mortgages with five percent interest rates. The broker sells the mortgage to a borrower for seven percent. That means the broker makes two percent.