Are you looking towards an exciting career as a mortgage broker? Like any career path being a mortgage broker has its crazy perks and great benefits, but it also has its share of hardships and unique problems. An interesting thought that always comes to mind is how much brokers actually make; in this piece we’ll take a closer look at the life of a mortgage broker.
So How Much Does a Mortgage Broker Actually Make?
Mortgage brokers make …money. They can either rake in millions a year or an above average salary; this is because a bulk of the earnings that brokers make is based off the loans that they bring in. Brokers do get a salary if they work for a firm, since they have to be able to contact prospective clients and file necessary paperwork.
According to Crown Money Management, you can make an average of $120,000 from your salary as a broker if you are affiliated with the right firm. They actually get more than decent pay compared to other professions in their particular sector. For instance, a commercial loan officer would be making about $50,000 per annum. Independent brokers on the other hand get paid via the commission they generate from their clients.
What Does a Broker’s Commission Look Like?
Before 2011, a broker could make money off two points, first the borrower and the lender. A loan generation fee could be charged to the borrower of the loan as well as being able to receive a premium from the lender. These costs were shouldered by the borrower in the form of higher interest rates for their housing loan payments.
However, the Federal Reserve stepped in and made a few changes to how commissions were paid out. They decided that brokers would no longer be allowed to receive a commission from both ends of the spectrum. In addition to this, they could only impose a commission on the loan amount itself.
In the new scenario, a mortgage broker can only be paid by one of the parties, either from the borrower’s side, or the loan lender’s side. The average revenue of a loan is usually 2.25 mortgage points, which is roughly 2.25 percent of the loan amount to put it simply.
Computing How Much a Mortgage Broker Makes
Let’s say that a mortgage loan cost $400,000, the broker would make $9,000 out of this transaction. However, there are still a couple of costs involved that the broker has to subtract from the amount that they would be making. This includes the cost of actually doing the business (think meetings, paperwork and all that).
They also do not close just one mortgage loan per month or a few per year. On a typical month a broker could close multiple deals, so to come to think of it, the commissions plus the stipend that they receive from their company quickly adds up to a pretty hefty “salary”, even after taxes.
There are rate sheets too for either lender based compensation or borrow based compensation. These also include how much they should be charging based on other details; they can simply just choose what form of compensation they would prefer.
Should I Become a Mortgage Broker?
Great question. It is certainly a busy lifestyle where you will get to meet a lot of people and engage in meaningful conversations. It’s fulfilling since you know you’re helping people’s dreams come true and it is one of the best-compensated jobs in its sector. Perhaps you can splash your cash and purchase a luxury villa or invest in rental property.
It will all boil down to what you really want to do, and your priorities in life, as you explore your career path in front of you!