Mortgage brokers are agents who put small business owners in contact with lenders; they don’t make loans, they just arrange them, and they usually get a payment of 1% to 2% of the loan amount from the borrower or the lender for each deal they arrange. This article examines the most recent available can earn.
Key Takeaways
Mortgage brokers are licensed mortgage loan originators who match borrowers with mortgage lenders.
A mortgage broker usually receives a commission of 1 per cent to 2 per cent of a mortgage. The payment is either by the borrower or the lender but rarely through both.
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What Is a Mortgage Broker?
When they’re not handing out business cards, nearly all real estate agents work under an employment contract with their broker or an ownership agreement with the broker. Mortgage brokers are licensed loan originators who often have relationships with numerous lenders. A mortgage broker shops for mortgages on behalf of their client. A mortgage loan officer is an employee or officer of the lender such as a bank or a credit union and can only offer that lender’s mortgage products.
ForbesThen again, borrowers-to-be might choose to work with a mortgage broker over a loan officer if they’re concerned about getting the lowest interest rate on their loan — or if they have other issues that could be seen as red flags on a loan application, such as a history of less than favourable credit.
So, mortgage brokers can play a role in the initial purchase of a mortgage, but also when borrowers refinance with a new mortgage.
How Are Mortgage Brokers Paid?
A mortgage broker can typically ask for 1-2 per cent of each loan they successfully arrange. Their pay is sometimes from the borrower, sometimes from the lender. At present the law prohibits, of course, any one and the same entity being paid by both.
Thus, for directing each $100,000 of a loan to a lender, the broker can expect to receive between $1,000 to $2,000. In March 2023, home-loans averaged $430,500: an average deal could net a broker $4,305 to $8,610.
A mortgage broker may be a sole practitioner or he or she may work for a firm that employs several brokers. Brokers who are employees – those who work for small firms with their own branch locations, for instance – may be paid a salary and half of their commissions could be given to the parent firm who employs them.
Note
In a case where you as a borrower would pay the commission to the mortgage broker, that amount would either be added to the mortgage loan, or else paid at the closing.
How Much Do Mortgage Brokers Make?
A mortgage broker working in large cities will make, on average, more money each year than one working in flyover country. Mortgage brokers make their money, usually on commission, from closing home loans. Home loan amounts tend to be larger where home prices are high. Hence, metropolitan areas will be more profitable for mortgage brokers than parts of the country where home price and loan amounts are more modest. An experienced, well-networked, and hard-driving mortgage broker who does many deals will make more money than one who is just starting out or working at it part time.
Different sources online list the following average salaries for brokers borrowers earn on salary:
Yet based on the 159 salary reports it had received at that time, he says, nationally, mortgage brokers make an average base salary of $98,162 a year, with commissions as a bonus. In other regions, the figure was even larger – $141,240 for San Francisco Bay area – although the sample sizes for those were small: just three brokers in each case.
At PayScale, which bases its data on only 57 reported cases, the average salary for mortgage brokers is listed as $64,630. Listing commissions of $12,000-$178,000, it reports that those with little or no experience made average total compensation of $47,000, while those with at least 20 years of experience averaged $69,000. Again, these are based on tiny n=s.
As per Glassdoor, the average base pay for mortgage brokers is $136,620 (with figures ranging from $111,000 on the low end and $352,000 on the high end), while the estimated additional pay in the form of a cash bonus, commission, tips, and profit sharing is $55,484 annually.
Finally, ZipRecruiter’s average national mortgage broker salary is $129,346 (from $11,500 to $297,500).
Do mortgage brokers make more than loan officers?
While incomes can vary significantly based on experience (the little data available indicates that the two occupations earn more on average than their respective titles suggest), on average, a mortgage broker can apparently earn more than a mortgage loan officer. For instance, based on data reported in April 2023 by Payscale, as seen below on the left, the average base salary is $49,369 for mortgage loan officers vs. $58,304, for brokers. An interesting comparison in terms of average base salary can also be made via Glassdoor, as illustrated below on the right: here, the average base salary for a mortgage loan officer is $154,275 vs. $136,620 for a mortgage broker.
Here, mortgage brokers might once have been loan officers before going out on their own for the chance to make more money, or for greater independence.
Do mortgage brokers need a license?
Yes, federal government regulates mortgage brokers through the Secure and Fair Enforcement for (SAFE) Mortgage Licensing Act of 2008, and licensed by the state government. In order to obtain a license, the licensee is required to take a number of state mandated course and to pass an examination in each licenced state. Once the licence has been obtained, the licensee must take a number of continuing education classes each year.
How can I make sure a mortgage broker is legitimate?
You can also enter a mortgage broker’s state licence number into the online search tool, Consumer Access, at the official Nationwide Multistate Licensing System run by state agencies. It will tell you if the mortgage broker is licensed as well as whether there have been disciplinary actions taken against that broker.
How can I find a mortgage broker?
Googling for a mortgage broker isn’t a great idea; you should ask friends and family for references. You might enquire with a local real estate agent, lawyer or accountant who has worked with the broker in the past, or with neighbours who’ve used one recently. Lists of brokers are available online.
The Bottom Line
They dont loan money out themselves, but offer their services as an in-betweeen, based on the interests of the lender and the needs of the borrower. Unlike loan officers, whose employment is by a certain lender, they deal with several lenders. Thanks to the fact that they tend to work with multiple companies, mortgage brokers tend to earn more than loan officers do (sometimes with variations between states and years of experience).