Mortgage brokers are business people who charge a fee to bring together borrowers and lenders. Mortgage brokers do not lend money, but they can help you find a loan. They usually network with dozens or even hundreds of lenders, so they can usually find loans for all types of borrowers and properties.

A mortgage broker analyzes your loan needs, then shops for a lender who will make the loan. Good mortgage brokers have a thorough understanding of the types of loans each lender makes and large networks of lenders to draw from, so they sometimes have the ability to secure loans that a single bank or other lending institution cannot make.

The lender gives final approval for any loan, but the mortgage broker prequalifies buyers and makes an assessment of their borrowing power. Brokers pull credit files for the lender and assemble all of the paperwork that the lender requires to approve the loan.

Conflicts of Interest

Mortgage brokers work with you in the same way that a bank-loan officer does, so they have access to your credit records and all of your personal information. Most brokers are honest and attempt to find you the best financing they can, but you must keep in mind that the lender pays them a fee for their services. A better deal for the lender results in a higher fee for the broker. Do not disclose the terms you will accept — let brokers tell you what loan terms they can secure for you. Shop around to make sure that the terms are reasonable, using your own copies of credit reports for the initial interview, so that your credit files are not accessed numerous times. (See Chapter 6 for more information on your credit report.) That can have a negative affect on your credit history.

Some borrowers prefer to work with mortgage brokers for all of their real-estate finance needs. You'll have a better feel for the type of lender you like to work with after you've completed a few real-estate transactions.