Who should pay the mortgage broker fee?

Asked by Frank, Los Angeles, CA Tue Jan 8, 2008

I am in the process of buying a home. The broker agent send me an estimate of closing with "1% mortgage broker fee" of the loan. I thought mortage broker fee should be paid by the lender? If this is case, will my broker be upset if I switch to regular bank? FYI, I can get the same rate with the bank. Thanks for any feedback.

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6
Michael, , Miami, FL
Tue Jan 22, 2008
Shop around for another broker ONLY IF YOU SEE A YSP on your loan. IF THE YSP IS ZERO stick with him he's doing you a GREAT thing.
I am a lic mortgage broker, I only help friends and family. In your case I would of explained to you. I charge 1% for family and 2% for friends. I can put these fees in two places; in the front end (broker pts, orig fees....etc.) or the back end (YSP). If I put 2pts on the back end YES the bank pays us. (pretty much like a kick back - go figure) and on the back end for doing this your interest rate is higher. (That's why they are paying us!) In the back end you pay the fees throughout your loan. The front end you pay them upfront - at closing means up front too. Your not charged the extra interest rate throughout your loan. That's as simple as I can put it. AS A BROKER - I LOOK FOR THE BEST RATE for my clients (Friends or Family members) I will always go with par from the bank meaning 0 YSP and put my pt's upfront.
1 vote
Stacey A. Ma…, , Westfield, MA
Tue Jan 8, 2008
Hi Frank, Matt and Jolie had some very good details in her answer - a couple more I can think of - First - is this for a house you are already in contract on or is it for a pre-approval? If you are not already in contract, or an accepted offer, you may be able to negotiate that the seller will pay for some or all of your closing costs - this fee included. Also, if you are already in contract, take a look at it - especially the dates - do you have the time to replace this lender? If not, but it is something you decide you need to do, first get an extension from the seller so you know you have the time to get it accomplished. I am hoping you have a Buyers agent who can help you, if not, speak with you attorney, best of luck! Stacey
1 vote
Matt Irvin, Agent, Walnut Creek, CA
Tue Jan 8, 2008
Many times your retail bank will not be able to beat a mortgage broker, however recently the markets changed a bit. Typically if you don't pay points your rate will escalate and there is a yield spread premium distributed to the broker paid by the bank. Mortgage brokers must disclose this YSP on the hud 1. Banks dont have to disclose their yield spread. I would rather work with a broker to shop my clients the best program that will close, not the internet special. Plus if your set and ready to go I would take what you have before another bank closes. The 1% point is a tax write off (consult your CPA to be sure)
Web Reference:  http://www.mattirvin.com
1 vote
Calgarymortg…, , Clear Creek, KY
Wed Nov 17, 2010
First of all - you can shope around (I am a mortgage professional in Calgary) if your broker is charging you and you can get it for free elsewhere - GO FOR IT! And who cares if he is upset?
0 votes
Cameron Fedd…, Agent, Los Angeles, CA
Tue Mar 4, 2008
1% fee is not that bad at all. I see alot higher all the time. My company generally charges .5-1%. Loans are alot of work and sometimes the rebates are not that good, so you are working and you do have to make your money somewhere. Also, you can go to the bank, but a good mortgage broker can have alot more options for you and many times, a better rate. When you see anything that says no closing cost or no fees, believe me, it is not true. It is just the bait to lure you in. Things change when you are to far into the deal to get out.
0 votes
Jolie Abreu, Agent, Farmington Hills, MI
Tue Jan 8, 2008
Hi Frank,

Your mortgage broker is calling it the "mortgage broker fee", but I would guess it is the "loan origination fee" which is basically the processing cost for putting your loan together. Even if you go directly to a bank, they will charge a "loan origination". Sometimes this can be rolled into your loan amount, which means less money out of pocket. And, sometimes a bank will offer a loan at no closing costs - Bank of America has a No Fee mortgage (you do have to qualify for the program).

Mortgage brokers can, in many cases, find the best loan for your particular situation because they have relationships with several different lenders. You really want to look at all of the terms of the loan and make the best overall decision for your needs. Sometimes having a slightly higher cost to obtain the loan will mean a lower payment for the time you own the home.

The bottom line is, everyone shold be able to get paid for doing their job and this is the main way a mortgage broker earns his/her paycheck. They do receive a certain percentage from the lender who closes the loan, but their primary income usually comes in the form of loan origination fees.

Hope this helps,

Jolie
Web Reference:  http://www.helpinghomes.net
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