How does a mortgage broker get paid?

Doesn’t it make sense that hiring a mortgage broker to obtain a loan for you would cost more since there is now another person involved and they must get paid too? Before I became a mortgage broker, I thought this way. When I needed my first mortgage 20 years ago, I ignored the calls from mortgage brokers and went directly to “Washington Mutual”. I only realized later that I paid too much for a higher interest rate. As a mortgage broker myself for the past 15 years, I can pretty much guarantee that a conventional loan will be cheaper and/or have a lower rate than your large banking institutions. A mortgage broker negotiates a commission percentage between 1% to 3% of the amount financed with a wholesale lender. The commission percentage will dictate the rates that a broker will be able to offer. The lower commission negotiated will enable the broker to pass along lower rates to the consumer. Loan officer’s will split this commission in some way with their broker, usually requiring a higher commission split and less benefit to the consumer. Banks have so much overhead expenses that they need to charge a higher rate and earn more from each loan originated. This overhead includes the retail store, loan officers and training, marketing, and the largest expense of shareholder earnings. Unless, you have a private client relationship with a bank or you are in the market for a jumbo loan, you are paying too much to originate your loan with them.   So why today are more than 60% of all loans originated at banks?

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