Intro: Mortgage Broker Income
Wondering just how much does a mortgage broker make? First, we must define what a mortgage broker is, the education it takes to become a mortgage broker, what a mortgage broker does, and how a mortgage broker gets paid. We hope that the explanations below help highlight the career path and goal of a mortgage broker as well as clarify what a mortgage broker’s average salary is at this time.
What Is a Mortgage Broker?
The intricate details of the mortgage business can be mystifying. Figuring out who the mortgage broker is can help in determining how the mortgage broker makes money. The confusion can stem from the number of players involved. There is the mortgage lender, the mortgage broker, the mortgage loan officer, the realtor, the buyer, and the borrower and/or the seller–and this is just a few of the individuals involved in the mortgage process. Let’s not even think about the paperwork, yet!
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A mortgage broker, as defined by Zillow, is an individual who matches the borrower (the person wanting a mortgage) with the lender that will provide the borrower with the best rates and terms. According to the Consumer Financial Protection Bureau, it might be difficult to determine if a borrower is working with a mortgage broker because a lender might act as both the lender and the mortgage broker. It is important to know if a mortgage broker is involved, however, because this could affect any fees charged to the borrower–one way the mortgage broker’s salary is paid.
A mortgage broker could also be a loan officer. The loan officer is responsible in assisting individuals in obtaining the loan that the mortgage broker assisted in finding. This would certainly help compensate the average mortgage broker salary, because loan officers are typically paid a commission on the loans they process, according to Zillow.
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Must a Mortgage Broker Be Licensed?
Mortgage brokers make money by evaluating the personal financial information they obtain from a borrower, by knowing the laws and regulations as they pertain to real estate financing, and by using all of this knowledge to match a borrower and lender together in order to best fit the needs of the borrower. In an effort to better protect consumers/borrowers, many states require mortgage brokers to obtain a license, according to Mortgage News Daily. This, however, differs widely among the states.
State licensing requirements can be found on the NMLS Resource Center. NMLS is the record-keeper of financial services licensing and registration for participating states. They are the sole system for licensing mortgage companies and mortgage loan originators.
A typical mortgage broker applicant must have a bachelor’s degree, some experience in marketing and sales, and the ability to pass the state examination to become a mortgage broker. However, according to the US Bureau of Labor Statistics, the career only requires a high school education level, licensure in the state in which the broker works, and no prior experience but must also have knowledge of law, government, economics, and accounting as well as critical-thinking skills, familiarity with document management, financial analysis, and accounting software programs.
What Does a Mortgage Broker Do?
Because a mortgage broker must know the laws and regulations that surround real estate financing, the mortgage broker should get paid for assisting the borrower as a liaison. For instance, according to one of National Mortgage News’s 2016 Top Producers Pro Tips, a mortgage broker should be able to assist a self-employed borrower by opening lines of communication between the borrower’s certified public accountant and the underwriter to bring clarity to complicated tax structures as they apply in the situation. This is one of many scenarios where the borrower would benefit from the advice of a mortgage broker.
According to Payscale, a mortgage broker’s job description includes:
- Assessing the local mortgage market
- Applying for loans and seeking pre-approval on behalf of borrower
- Mediating between the borrower and lender
- Obtaining financial history of the borrower
- Using marketing and selling techniques
The salary of a mortgage broker is dependent upon his ability to accomplish all of these tasks. As discussed more in-depth below, the mortgage broker salary is typically on a commission base; therefore, if he is unable to fulfill his duties, his salary will be affected greatly. If, however, the mortgage broker does a stellar job at his duties, he will reap the benefits of his hard work.
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How Do Mortgage Brokers Make Money?
Mortgage brokers make money from the sale of mortgages. Typically, a mortgage broker gets paid a commission from the lender after a mortgage is sold. According to Money Sense, the amount of the commission can vary from .50% to 1.20% and this could depend upon such things as the type of mortgage sold and what the lender is offering.
Realtor.com explains that mortgage brokers are usually independent of lenders and work as an intermediary between the lender and the borrower. As a result, the mortgage broker could make money from either the lender or the borrower. The mortgage broker salary can include a base pay plus commission, which might be paid on a fee basis, typically a small percentage of the loan amount. The amount for this fee could be added to the total amount of the loan or paid up front.
The Dodd-Frank Act of 2010 was put into place to protect borrowers from unscrupulous dealings in lending and mortgage practices. Specifically, this Act affected mortgage brokers from making money by charging both the lender and the borrower for services. However, some individuals warn against mortgage brokers that might attempt to raise the mortgage broker’s salary by not working for the client’s best interest and instead working toward the higher commission rate alone.
How Much Do Mortgage Brokers Make?
There are several factors to consider in determining how much mortgage brokers make. For instance, one should consider the following:
- Geographic location
- Cost of living
- Socioeconomic status of his clientele
- Number of annual clients
- Real estate market in the area
- Mortgage broker’s experience
- Value of the loan products
Chron.com cited the College of William and Mary’s statistic stating that the average mortgage broker salary is between $60,000 and $90,000. Payscale states that the national average mortgage broker salary is $51,856 per year. The total pay, according to Payscale, including base pay, bonus, profit sharing, and/or commission can range anywhere between $29, 362 and $197,489.
The geographic location and cost of living can drastically affect the average mortgage broker salary. For instance, the average mortgage broker salary for one working in California is $110,000, whereas the average mortgage broker salary in Florida is $95,000.
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What Makes a Mortgage Broker Successful?
One blogger wrote about the 7 Traits of Highly Successful Mortgage Brokers. Having these traits might assist in improving one’s average mortgage broker salary. In her article, Jessica Schweppe pointed out that successful mortgage brokers always:
- Provide clients with multiple options
- Are responsive to clients
- Explain the details of the loans
- Do not rush clients
- Show proof of success
- Allow the clients to make the decision they are most comfortable with
- Are open with the clients and ready to answer any questions
By following the above practices, a mortgage broker could potentially increase her clientele to those with higher socioeconomic status, which in turn, would increase the mortgage broker salary rate.
The number of annual clients can affect the average mortgage broker salary significantly. This has more to do with the individual mortgage broker than anything. Good marketing skills are tantamount to the number of annual clients. If a mortgage broker cannot market his skills well, then his average mortgage broker salary would be much less than his peers. Many mortgage brokers are entrepreneurs and must have the ability to market and sell their ability to act as the best mortgage broker around. Entrepreneur Magazine summarizes the key elements to a marketing plan.
- Have all appropriate documents on hand prior to beginning (financial reports, products/skills, target markets, understanding of marketplace)
- Market situation – the current situation of the real estate market
- Threats and opportunities – bad and good implications drawn out from the market situation
- Marketing objectives – what you want to achieve
- Budgets and controls
Another beneficial tool is using a SWOT analysis. According to the Modern Analyst, writing out the Strengths, Weaknesses, Opportunities, and Threats allows for a high-level evaluation of the mortgage broker’s situation, within a company or within the market place. An example of a SWOT analysis for a mortgage broker might look like this:
Analyzing the scenario like this allows a mortgage broker a bird’s eye view of her situation so that she can improve her skills and increase her earnings.
A mortgage broker must consider the area’s real estate market and do an analysis on the status of the market in order to determine if his average mortgage broker salary will be acceptable in the area. SFGate Home Guides explains that the real estate market analysis is a study of the market values of homes within an area. The market value differs from an appraised value in that the market value is the amount that a potential buyer would pay for the house under the current market conditions. If the real estate market is not fairing well in a particular area, the mortgage broker salary will be affected negatively.
An average mortgage broker salary is higher with the broker’s experience, just as other professionals charge more for the seasoned partner to complete the work than an associate. The only way to increase the mortgage broker salary in this regard is to keep at it!
The value of the loan products that the mortgage broker sells might affect the mortgage broker salary. This has more of an effect if the lender is responsible for paying the mortgage broker. For instance, if the lender has provided a loan with a low interest rate to the mortgage broker’s client and the lender is responsible for paying the broker, the amount paid might be lowered because of the low interest rate.
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Conclusion – Mortgage Broker Salary – Full Details on How Much Mortgage Brokers Make
Working as a mortgage broker can be a volatile or very stable position. Dependent upon so many different scenarios, a mortgage broker salary can differ widely for a variety of reasons. If real estate is an interest, if real estate laws and regulations make you happy, and if you are capable of marketing your skills and services, then having a career in this field might be rewarding. Otherwise, we are not certain that the average mortgage broker salary as contemplated above would be so grand.
Taking into consideration the amount of education, hard work, and selling involved to reap the benefits of becoming a mortgage broker has made clear that to be in this business, an individual must love the work entailed.
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