Mortgages may be originated by bank employees or they may be originated by third parties known as mortgage brokers. A brokered mortgage loan is one that is originated by someone who is not the lender.
What is a Brokered Mortgage Loan?
Just as a real estate broker arranges deals between sellers and borrowers, a brokered mortgage loan means that a deal is being arranged between a lender and a borrower. In this case the lender is a bank and the buyer is the borrower. The broker is the go-between.
The Mortgage Broker's Job
It is the mortgage brokers job to assist borrowers in finding the best loan available. Borrowers use mortgage brokers to obtain a mortgage for many reasons, but the loan the borrower will use to buy a house will be funded by a bank, not the mortgage broker.
Mechanics of a Brokered Loan
A brokered loan means that the loan was arranged between a bank and a borrower. The bank must approve the borrower through an underwriting process, and if approved the lender will fund the loan at the mortgage closing. The broker will collect a fee for services rendered.
Mortgage Loan Process
A borrower who chooses to use a mortgage broker will complete all of the mortgage application paperwork with the broker. The broker is responsible for providing the borrower with all mortgage disclosures before sending the application to the bank for approval.
Brokered Mortgage Loan Pros and Cons
Mortgage brokers can provide a valuable service in guiding borrowers through the complex mortgage process. However, the difference in the cost of a brokered loan may be significant and borrowers should shop around with other brokers and the banks.
Gary Crum is a nationally published author and an adjunct college instructor, He has a B.S.B.A. in human resources from Florida State University and an M.B.A. from Florida Atlantic University. He has been published in "American Banker," "Credit Union Business," "Independent Banker," "Bank Director Magazine," "Christian Science Monitor," "Mortgage Banker," "Miami Herald" and "Palm Beach Post."