Who Pays the Broker?

When you go through a broker, you might be surprised that you do not have to pay. Does this mean that brokers work for free? Of course not! Someone has to pay them, but it isn’t you.

Brokers get paid by the lender that you go with. It is a commission of sorts. Many brokers get what are called trailer fees today. This is where the broker does not take all the commission up front.

Instead, a smaller amount is taken at signing, and a percentage is given to the broker every year as long as the mortgage is active.

Let’s recap what we’ve learned so far.

• Mortgage brokers are middlemen between buyers and lenders

• Brokers will gather customer info, then shop lenders

• Offers are collected and presented to the buyer

• Make recommendations as to which offer to take

• Brokers remain on the job until the closing process is finished

Potential Risks

Since brokers get paid by lenders, there is a possibility of a conflict of interest. Some brokers may be tempted to go with individual banks, not taking into account the best interests of the buyer.

Thankfully, this is a minority, as most brokers are mainly concerned with the buyer’s needs and wants, getting a mortgage that works best for the buyer. After all, satisfied customers bring in more money than those who got shafted for a bigger commission.

Ok, final recap of what we have learned:

• The lender pays the mortgage broker rather than the buyer

• The agent makes a commission off of each mortgage

• Some brokers get trailer fees, which is part of their commission paid out over time

• Commissions may cause a conflict of interest