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.Mortgage Broker in Columbus is an excellent resource for this.
Front-End and Back-End Compensation
Most mortgage brokers get paid through commission. 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.
Two percent might not sound like much, but it quickly adds up when selling houses and commercial real estate that can easily cost hundreds of thousands of dollars. If you purchase a $250,000 house at seven percent on a 30-year mortgage (and the broker got the mortgage at five percent), then he or she makes about $115,000 from the sale.
If course, not every broker can manage to increase the price by two percent. Still, it’s a good way for mortgage brokers to make good money without asking the borrowers to pay upfront.
Mortgage Dealers Who Get Paid Salaries
While few mortgage brokers get paid a flat salary, some get paid a combination of salaries and bonuses.
The salary makes sure that mortgage brokers get paid for their work, even during years when few people want to purchase real estate. Most brokers make the bulk of their incomes through bonuses, but the salary serves as a type of guarantee.
Some researchers show that most mortgage dealers get paid between $60,000 and $90,000 a year.
Choosing a Mortgage Dealer
When choosing a mortgage broker to help you find a good deal that will let you purchase property, feel free to ask them how they get paid for their services. You will find that the majority get paid through front-end or back-end compensation, even though some get one of these compensations in combination with a salary.
Some people feel more comfortable using brokers who ask for front-end payments. Front-end compensation makes it easy for borrowers to see exactly how much they are paying their brokers.