As a Home Buyer, Do I Pay the Mortgage Broker?
As a home buyer, yes, you would pay the mortgage broker for his or her services in finding you the right and hopefully most inexpensive mortgage. You would also pay him for explaining which mortgage best suits your needs at the current time. Usually, the way it works is this: the real estate brokers get paid by the seller at closing and the mortgage broker gets paid by the buyer. (There is obviously some confusion in the above regard related to real estate brokers, because even though the buyer’s broker is paid by the seller through a broker co-operation, the buyer’s broker is not an agent of the seller. Just wanted to clarify that.)
The mortgage broker will typically charge points if you want to buy down the interest rate of your mortgage. Usually 1 point corresponds to 1/8 of a percentage drop in your mortgage rate. Other fees involved are processing fees (sometimes points are included here, so read your HUD-1 carefully), transaction fees, credit reporting fees, appraisal fee, underwriting fee and so on.
The total of these fees usually adds up to between 1% - 3% of the purchase price of the house. This is why when we ask for closing costs back from the seller, they are usually capped at 3% of the purchase price. The negative aspect of getting closing costs back from the seller though is that they get added on to your loan, so you’re paying for them essentially for 30 years. It is much better to pay closing costs out of pocket if you can. It even makes for a stronger offer.
