In this post, we will discuss the job of a mortgage broker or agent. We will look at how a mortgage broker's salary is formed and what salary you can expect in the mortgage broker job. We will look into the average day of a mortgage broker and what makes the mortgage broker successful. Lastly, we will also discuss the difference between the mortgage broker and the mortgage agent.
What is a mortgage broker or agent? What is their role in mortgages? What do mortgage brokers do?
Mortgage brokers and agents are practicing professionals who assess a borrower’s financial goals for real estate financing. After a detailed analysis, the mortgage broker provides solutions to meet those goals by acting as an intermediary with the appropriate lending source. In determining the “appropriate lending source,” two facts are assumed: one, that the client is appropriate for the lender, and two, that the lender is appropriate for the client.
Therefore, by this definition, a mortgage broker/agent has two clients: the borrower and the lender.
The typical activities, among others, of a mortgage agent/broker, all of which will be discussed in detail throughout this book, include brokering both residential and commercial mortgages, including:
Brokering a new mortgage, collateral mortgage, line of credit, or other types of loan secured by real property (which is land and whatever is affixed to it)
Refinancing of an existing mortgage
Arranging investing in a mortgage by one or more individuals
Providing mortgage advice and counsel, including renewal options
The code and the law state that the key expectations for mortgage agents when servicing a client are:
Act in the borrower’s best interests. The borrower’s first expectation is that the mortgage agent will at all times act in the best interests of the borrower. This expectation is crucial to the borrower and is vital to the success of the transaction. Acting in the borrower's best interests can best be defined as putting the borrower’s needs and concerns first and foremost above others involved in the transaction, limited only by ethical, moral, and legal restrictions.
Completely analyze the borrower’s needs. Taking a mortgage application and finding the right lender and product for the borrower is not possible unless the mortgage agent has detailed knowledge of a borrower’s needs and financial situation. To completely analyze a borrower’s needs requires that the mortgage agent assist the borrower in determining what those needs are.
Make appropriate recommendations based on the borrower’s needs. By completing a full analysis of their needs and being determined to do what is in their best interests, the mortgage agent will make the appropriate recommendation, provided that they have the requisite knowledge to determine what that recommendation should be.
Facilitate the transaction to its successful completion (funding). Successful mortgage agents will advise the client of all of the steps in the transaction and stay in touch with them throughout, even when the mortgage agent is no longer involved.
What is the difference between a mortgage broker and a mortgage agent?
There are two licenses that allow individuals to broker a mortgage: mortgage agent and mortgage broker. The difference between these two licenses is that a mortgage broker, in addition to being able to broker mortgages, can also be the Principal Broker of a mortgage brokerage, a role that is required to provide effective supervision of the brokerage’s mortgage agents, among other duties. Otherwise, both a mortgage agent and a broker must:
be authorized by a brokerage to deal or trade in mortgages on its behalf
have successfully completed an approved education program for mortgage agents
The difference between an agent and a broker is that a broker also must:
have been licensed as a mortgage agent for at least 24 of the 36 months after they became a mortgage agent
have successfully completed an approved education program for mortgage brokers and passed the approved qualifying exam within three years before applying for the license
What to expect for the mortgage broker salary?
A career as a mortgage agent can be both financially and personally rewarding.
As the individual responsible for bringing borrowers and lenders together, you will typically be compensated by the lender in the form of a finder’s fee or commission. The commission is based on the number of basis points (bps) multiplied by the amount of the mortgage.
In other cases, where you are dealing with a borrower who doesn’t qualify with a traditional lender, you may arrange the mortgage with a private lender. In this case, you would charge the borrower a brokerage fee that would be deducted directly from the mortgage proceeds.
First, it is important to be mindful of the fact that your role is to always do what is in the best interests of your clients while being concerned with your own income last. In this way, you will always be conducting yourself in a professional and ethical manner.
With this in mind, we can take a look at a typical transaction. The typical finder’s fee or commission paid by lenders in today’s marketplace is approximately (this figure will change based on the lender, product, and other factors) 85 basis points (.85%), which is referred to as 85 bps. If you have arranged a mortgage in the amount of $350,000, then your brokerage would be paid a finder’s fee of 85bps x $350,000, or .0085 x 350,000, which equals $2,975.
Mortgage agents work on a commission split with their brokerage. For experienced mortgage agents, the split can be up to 100%, but on average is 85/15 (the agent receives 85% of the commission). This would equate to a commission payable to you of $2,528.75. For new mortgage agents, the split will typically be less until the brokerage has determined that the agent has gained an appropriate level of experience.
The average transaction will take approximately 8 hours to complete (this is an average; some will be longer while others shorter, and this amount of time is typically spread over several days). By dividing the commission by the number of hours ($2,528.75 / 8), we can determine that you would have earned $316 per hour for this transaction. As you can see, this hourly salary beats the salary of many other jobs. If an agent were to average one transaction per day, his or her income would be approximately $606,900 per year ($3,612.50 x 20 business days per month x 12 months). It is also worth noting that the booming real estate market and the increase in the prices of houses result in more people taking bigger mortgages. With that, you may realize growing income just because people take bigger mortgages.
Now, the most difficult part is to find clients to get one transaction a day and it is likely impossible. The main part and success factor in the mortgage broker's job is finding clients.
A new agent will typically not have an income for the first three months of his or her career. It takes time to find clients, and then it takes time to close or fund the transaction. After that, it takes more time to receive your commission. A new agent should expect to see an income after the first three months and should be, given industry averages, aiming for 3 funded transactions per month at the end of his or her first year. An average of 3 fundings per month would equal an income of $130,050 per year.
Of course, these are only averages. A highly successful agent may earn substantially more than this amount in his or her first year, while another agent may earn substantially less.
As you continue on your new career path as a mortgage agent it is important to note that many agents earn six-figure incomes while others do not. The potential is directly related to the time, effort, and expertise, among other factors, of the agent.
Success factors of winning in a career of a mortgage broker
The job of a mortgage broker includes the following tasks:
working the prospective clients, analyzing their financial needs.
evaluating the financial position of the client (prospective borrower), their debts, credit scores, income to understand how much they can borrow.
finding the proper lender for the client. This includes building a network of contacts at different lenders, building relationships with lenders. This will help secure financing for your clients (borrowers) in a stress-free way and also secure the best rates for them.
working with the lender to get the client pre-approved for the needed financing.
submitting applications for obtaining the financing.
on the day of closing, work with the lender, borrower, their layer, realtor to get the transaction finalized.
searching for new clients.
All of the above, with the exception of searching for the client, over time, becomes a routine when you repeat the process again and again. Knowing all the rules and laws is important, but they don't change too much and too frequently. Eventually, you learn them by heart. As mentioned before, all these steps usually take about 8 hours for one client, and this time is usually spread over the course of a few months.
The most difficult part of the job for many people is the fact that you have to search for your clients. The big broker companies that employ mortgage agents and brokers will provide lots of training (including on how to find your clients), sales materials, etc. Also, the big mortgage broker companies will have their own marketing department that pulls in people from different sources to apply for their services. Then, the marketing department will pass these prospective clients to mortgage brokers. However, the number of clients that come this way is small. Also, these clients will likely go to the mortgage brokers who were with the company for a long time and have the most experience.
The search for clients may come naturally to some, others will learn this, but many people fail. On a positive note, over a few years, if you do your job well, the clients will start recommending your services to their friends and family. Also, with an average term of a mortgage of 3 to 5 years, the clients will be coming back for refinancing needs when they decide to move, buy a new property, etc. Thus, the hard work you put into the search of the clients in the first 3-5 years will generate a constant stream of clients later.
Thus, the most crucial success factors in the job of a mortgage broker are:
Great customer service. Making sure you fully understand their situation, care for your clients, help them understand the complex mortgage world, helping them in times of financial troubles will go a long way as they will likely going to recommend you and come back.
Work hard to find your first clients. While you will go through stages of success and failures, the key point is to try. Mixing different strategies to see which ones work the best requires trial and error. So, be prepared for failures and don't let them bring you down.
Please keep in mind that while you may really want to help your clients, honesty always comes first. While you may be tempted to help this or that client by fudging the numbers on the application if you are caught this is the end of your career. Also, you are actually doing a disservice for your client as they may later run into financial problems not being able to pay for their mortgage.
Build a network of lenders. Personal relationships are key here as you will find people who do everything quickly and with no mistakes. Others will delay things and make errors. Removing these people from your network is key to reducing the stress levels for yourself and your clients.
As you can see, the career of a mortgage broker can be extremely rewarding. Agents have the potential to earn significant incomes while helping borrowers find the product that best suits their needs and circumstances. In performing your duties professionally and ethically you will earn the respect of your industry peers, build a loyal client base, and develop a fulfilling lifelong career.