What's a Mortgage Broker?

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By Selena Maranjian (TMF Selena)
November 18, 2002

Q. What's a mortgage broker?

A. A mortgage broker sets you up with a mortgage. There are other ways to get mortgages, though, such as from a bank, credit union, savings and loan, and even Web-based lenders. In exchange for setting up the mortgage, most lenders charge origination fees. Mortgage brokers charge a broker's fee (and are sometimes compensated by the lenders they work with). More than half of all mortgages in America originate with mortgage brokers.

Depending on the fee they charge and the kind of deal they can get for you, mortgage brokers can be your best bet. They have access to a wide variety of lenders and programs and can be especially helpful if your credit history is checkered or if you have any other special circumstances. They can also help you decide what kind of mortgage (e.g., a 30-year fixed, a five-year adjustable) is best for you.

Should you go with a mortgage broker? It depends. See what your alternatives are and go with the best deal you can find. It's smart to do a bit of research before talking to mortgage brokers, though. You'll delay their hard sell and you'll be more informed.

Learn more at our Buying or Selling a Home discussion board and in our Home Center. At our Fool Mortgage Center, you'll find links to several mortgage lenders offering attractive rates, as well as a bunch of information on mortgages in general and tips on what to look for.

You can also learn a lot at The Mortgage Professor's website. (Much to my surprise, when I stumbled onto this website, I discovered that the Mortgage Professor is actually a former professor of mine, Jack Guttentag!) Of particular interest is Guttentag's innovative Upfront Mortgage Broker (UMB) program. If you're shopping for a mortgage broker, see if the ones you talk to will agree to work as a UMB.

If you have any questions, thoughts, or opinions on this column, share them with others on our Ask the Fool discussion board.

This question and answer is adapted from The Motley Fool Money Guide: Answers to Your Questions About Saving, Spending and Investing. For answers to this and 499 other common money questions, check it out -- it's a handy resource.