Mortgage Brokers act as intermediaries between a prospective borrower and a lending institution. In most states the broker is required to be licensed consistent with the provisions of the Nationwide Mortgage Licensing System and can be liable for fraud during the entire life of the loan.
He is normally paid by the Mortgage Lender for loan applicants with outstanding credit. For applicants with a troubled credit history or other issues which make the borrowing process more difficult, it is customary for the broker to charge extra fees directly to the loan applicant.
There are several advantages for using an experienced mortgage broker. He has an in-depth knowledge of the varying requirements of different lenders. In a tight market he normally can find the best rate and most suitable lender for the borrower. Because he obtains financial information and clarifies potential credit questions at the onset, he can save the loan applicant much time.
Most of the historical disadvantages of utilizing the services of a mortgage broker surround conflict of interest issues. Banks often pay brokers different rates for obtaining applications for diverse types of mortgages. A broker can have torn loyalties. Does he steer the applicant towards the lender who offers the best deal for the borrower or towards the lender who will pay the highest fee to the broker? The overwhelming majority of brokers are honest and serve the interest of the client first.
A Mortgage Lender, on the other hand is the actual institution that loans the funds to the applicant for purposes of purchasing real property. Typically the lender employs a loan officer who works under the licensing umbrella of the institution. While the loan officer knows the requirements of his employer more comprehensively than a mortgage broker, his knowledge of the internal procedures and requirements of other institutions is relatively limited.
Potential home buyers have used both mortgage brokers as well as lending institutions as their first step with success. For greater information regarding the use of mortgage brokers, visit: http://mortgage.nationwidelicensingsystem.org