A mortgage broker is a licensed professional who helps homebuyers and refinancers find suitable loan products by connecting them with banks and lenders. Unlike lenders, brokers don’t provide funds themselves. Instead, they act as intermediaries guiding borrowers through applications, documentation, and approvals while ensuring compliance with strict consumer-protection rules.

Both in the U.S. and the UK, mortgage brokers operate under regulated frameworks that outline how they work, how they are paid, and what disclosures they must provide.

What Mortgage Brokers Do

A broker’s main responsibility is to make the mortgage process simpler and more accessible for clients. They:

• Assess a borrower’s financial situation (income, debts, assets, credit history).
• Collect and prepare required documents.
• Present loan options from multiple lenders.
• Submit applications and coordinate with underwriters.
• Act as a communication bridge between borrower, lender, and other parties until closing.

In U.S. law, a mortgage broker is defined as a non-lender intermediary their value lies in giving borrowers access to a wide range of products and handling the legwork of applications and negotiations.

Broker vs. Lender

It’s important to distinguish the two:

• Lender: Provides the actual funds for the loan, sets terms, and closes the mortgage.
• Broker: Does not lend money but arranges financing with third-party lenders on behalf of clients.

A broker can often present multiple options for interest rates, loan terms, and eligibility requirements, while a direct lender only offers products from their own institution. This makes brokers particularly valuable for borrowers seeking comparisons and flexibility.

How Brokers Are Paid

In the U.S.

• Brokers are compensated either by the borrower or the lender, but only once the loan is finalized.
• By law, compensation cannot be tied to interest rates or certain loan terms.
• Typical broker fees range around 1%–2% of the loan amount, though the exact figure varies.
• Fees may be built into closing costs or covered by lender-paid arrangements, and they must always be disclosed upfront.

In the UK

• Most brokers receive a procuration fee from the lender, commonly about 0.35%–0.4% of the loan.
• Some charge the client a fixed fee, percentage, or both.
• Others advertise “fee-free” services, relying entirely on lender commissions.
• Transparency is key borrowers should always ask how the broker is compensated and whether advice is tied to a restricted lender panel or the whole market.

Licensing and Oversight

United States

• Brokers and loan originators must be licensed through state regulators and the Nationwide Multistate Licensing System (NMLS).
• Requirements include education, exams, and surety bonds (varies by state).
• At the federal level, the Consumer Financial Protection Bureau (CFPB) sets rules around disclosures, compensation, and consumer protections.

United Kingdom

• The Financial Conduct Authority (FCA) enforces standards under its Mortgage Conduct of Business (MCOB) rules.
• Brokers must disclose whether they cover the full market or only specific lenders.
• When advice is given, it must be suitable for the client’s financial needs.
• Under the newer Consumer Duty framework, the FCA has simplified rules to make advice clearer and improved protections for execution-only transactions.

The Application Journey

Here’s what typically happens when working with a mortgage broker:

1. Initial review: Broker gathers income, debt, credit, and employment details.
2. Loan options: Possible loan amounts, loan-to-value ratios, and lender products are presented.
3. Submission: Broker sends the application to lenders for pre-approval and underwriting.
4. Coordination: Appraisals, conditions, and required paperwork are managed.
5. Closing: The lender funds the mortgage in their own name; the broker is compensated per the agreed structure.

Advantages of Using a Broker

• Broader access to lenders and mortgage products.
• Convenience – one point of contact instead of approaching multiple banks.
• Transparency – regulated disclosures about costs and services.
• Time savings, since brokers manage much of the communication and paperwork.

Considerations and Risks

• Some brokers only work with a limited lender panel, so it’s important to ask about market coverage.
• Confirm all fees and compensation structures in writing before moving forward.
• Verify authorization:
  • In the U.S., through NMLS or state regulator sites.
  • In the UK, via the FCA register.

Evaluating a Broker

Before choosing a broker, consider asking:

• Are they licensed and properly registered?
• How are they compensated, borrower fees, lender commissions, or both?
• Do they provide whole-of-market access or work with only select lenders?
• What level of support will they provide (pre-approval, document management, negotiation)?

Key U.S. Rules in Brief

• Brokers are non-lender intermediaries.
• Compensation can only be borrower-paid or lender-paid and is earned at closing.
• State and federal rules require licensing, testing, bonding, and strict disclosure standards.