Mortgage Q&A: “How much do mortgage brokers make?”
Just to be clear, this article is about how much mortgage brokers make on the loans they originate, not how much they make in the way of salary.
Although, you could argue that the two are very related, so if we know what they’re making per loan, we’ll have a decent idea as to what they might take home each year as well.
In the very recent past (before April 1, 2011), mortgage brokers could make money on both the front and back-end of a loan.
Put simply, they could charge a loan origination fee directly to the borrower and get paid by the mortgage lender via a yield spread premium .
So some were paid twice for the same transaction, though the yield spread premium came in the form of a higher mortgage rate. so it didn’t directly cost anyone – it just meant the borrower had a higher mortgage payment for their entire loan term.
The Fed came in and changed all that by effectively banning yield spread premiums. and now mortgage brokers can only get paid by the borrower or the lender, not both.
Okay great, so what do they make?
Well, a recent press release from 360 Mortgage Group detailing the compensation changes said mortgage brokers generate an average revenue of 2.25 mortgage points on a loan.
In other words, on a $300,000 mortgage, they’d make
$6,750 in revenue.
After subtracting costs of doing business, you’d have your profit per loan.
Not a bad take, depending on how many loans are closed each month, and what expenses are involved.
Will mortgage brokers still make the same money?
The 360 Mortgage Group believes brokers will be able to adapt to the changes, and if you know anything about the mortgage business, rules are circumvented overnight.
Many lenders are now publishing multiple mortgage rate sheets, with one version lender-paid compensation and the other borrower-paid compensation.
So brokers can simply pick up a specific compensation-based rate sheet they’d like and be on their way.
For example, if they want to make 2.50 points, there’s a rate sheet for that. If they only want one point, there’s a rate sheet for that too.
But the rule change will probably reduce commissions for mortgage brokers, since they won’t be able to take a little from both front and back.
Taking compensation from just one place, as opposed to two, means it’ll be more difficult to charge an excessive amount, though not impossible.
This is relatively good news for borrowers, but bad news for brokers, who continue to lose market share.
It’s recommended that you shop for a mortgage by gathering rate quotes online, at your local bank/credit union, and also via a mortgage broker or two. You’ll never know who might have the best rate/terms unless you shop around!