Video Overview: How Mortgage Brokers Get Paid

• Who Pays Mortgage Brokers
  • A broker is paid either by the borrower or by the lender.
  • Brokers are paid by the borrower when a broker adds points to your loan. One point is equal to one percent interest.
  • Brokers are paid by the lenders through rebates.
• How a Broker Makes Money
  • Whether paid by the borrower or the lender, the broker makes money from taking a percentage of the value of your loan. Brokers earn more money by either taking a larger percentage or by getting you a larger loan amount.
• How much is Fair?
  • A competitive rate for your broker to earn is between one and two percent.
  • With larger loans, it is reasonable to negotiate with your broker. If you feel he or she is making too much money on your loan, ask to lower the percentage rate received.
  • The larger your loan amount is, the more leeway you have when negotiating.
• Locking in Rates
  • Interest rates fluctuate daily, sometimes multiple times each day. When you call your broker to lock in a rate, your broker may not actually lock it in that day. He or she may be speculating that the rate will go down the next day. Locking in at the lower rate earns the broker extra money.
  • If your broker ever tells you that the rate is no longer available, it's because your broker speculated and the rates went up instead of down.
• Bank Rebates
  • Brokers are usually required to document how much money they are earning from the lender. On the good faith estimate, it is listed as the Yield Spread Premium. The amount listed here is being sent directly to the broker by the lender.