Mortgage Q&A: “How much do mortgage brokers make?”
Just to be clear, this article is about how much mortgage brokers make on the home loans they originate, not how much they make in the way of salary.
Although, you could argue that the two are one and the same because brokers typically aren’t paid a salary, 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.
Of course, you have to consider their costs to operate as well, which will vary based on how large their shop is, if they employ loan officers, how much they spend on advertising (if any), and so on.
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 also get paid by the mortgage lender via a yield spread premium.
So some brokers 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.
That doesn’t mean they can’t still make a lot of money per loan, it just means the way they can get paid via the wholesale mortgage channel has been limited.
Okay great, so what brokers 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 home loan.
In other words, on a $300,000 mortgage, they’d make roughly $6,750 in revenue. That sounds pretty good, doesn’t it?
But as noted, we have to subtract the costs of doing business, which are variable. From there, you’d have your profit per loan.
Not a bad take for helping people get mortgage financing, depending on how many loans are closed each month, and what expenses are involved.
As you can see, mortgage broker salary will definitely vary based on the size of the loans they typically close. In more expensive areas of town (or the country), brokers might make six-figures or much, much more.
While those in lower-priced metros could make significantly less if costs are still relatively similar.
Additionally, brokers who focus on refinances might have higher loan volume than those who help home buyers purchase real estate, as the latter can be harder to come by.
Of course, if they partner with a local real estate office or two, they have the ability to generate a ton of purchase loan business too, so it’s hard to say either specialty would be more successful universally.
Their average income will also depend on the financial institutions they choose to partner with, as compensation structures and points per loan will vary across different mortgage lenders.
One aspect of a mortgage broker’s job is linking up with lending partners that are good at quickly closing loans, while also offering competitive pricing. As such, these partners can greatly affect a mortgage brokers salary.
Will mortgage brokers still make the same money?
The 360 Mortgage Group believes brokers will be able to adapt to the compensation changes, and if you know anything about the mortgage business, new rules are typically circumvented overnight.
Many mortgage 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 average incomes for loan brokers, since they won’t be able to take a little from both the front and back of the loan.
Receiving compensation from just one entity, as opposed to two, means it’ll be more difficult to charge an excessive amount per loan, though not impossible.
This is relatively good news for home buyers and existing homeowners looking for refinance who will hopefully enjoy lower mortgage payments, but bad news for mortgage brokers, who continue to lose market share. It could also dent their total pay.
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 actually take the time to shop around!
Read more: How does a mortgage broker get paid?