What Is the Average Commission for a Mortgage Broker?

A mortgage broker serves as an intermediary, connecting individuals seeking home loans with various lenders. These professionals assist borrowers in navigating the complexities of the mortgage market, aiming to find suitable loan products and terms. Understanding how a mortgage broker earns income is important for anyone engaging their services during the home financing process.

How Mortgage Brokers Are Compensated

Mortgage brokers primarily earn their income through two compensation models: Lender-Paid Compensation (LPC) and Borrower-Paid Compensation (BPC). In the Lender-Paid Compensation model, the mortgage lender pays the broker a commission directly. This means the borrower does not pay the broker out of pocket.

Under Borrower-Paid Compensation, the borrower pays the mortgage broker directly for their services. This payment can take the form of a flat fee or a percentage of the loan amount. Borrowers should discuss the fee structure with their broker upfront to understand how this direct payment will be handled. Mortgage brokers are not permitted to receive compensation from both the borrower and the lender for the same transaction.

Typical Commission Rates

Mortgage broker commissions generally range from 1% to 2% of the total loan amount. This percentage applies whether the compensation is paid by the lender or directly by the borrower. For example, a 1% commission on a $400,000 loan would equate to $4,000 in earnings for the broker.

These percentages are often referred to as “points,” where one point equals one percent of the loan amount. While 1% to 2% is a common range, these figures can vary based on several factors.

Influences on Commission Amounts

Several factors can influence the commission amount a mortgage broker receives. The type of loan product, such as conventional, FHA, or VA loans, can affect compensation rates.

Larger loan amounts generally result in higher commission earnings for the broker, especially when compensation is a percentage of the loan. Current market conditions and geographic location can also cause variations in compensation. Additionally, a broker’s relationship with lenders may influence the rates they are offered.

Understanding Broker Fees and Your Loan

Mortgage broker fees and compensation are disclosed to borrowers through standardized documents during the loan process. These fees are itemized on the Loan Estimate (LE) and the Closing Disclosure (CD). The Loan Estimate provides an initial estimate of costs, which borrowers receive shortly after applying for a mortgage.

The Closing Disclosure, issued at least three business days before loan consummation, provides the final, confirmed details of all costs. Broker compensation is listed under “Origination Charges” in Section A on page 2 of the Loan Estimate. If the broker’s compensation is lender-paid, it may be noted on the Closing Disclosure even if not explicitly shown on the Loan Estimate. Reviewing these disclosures carefully ensures transparency regarding all associated costs.