#ThursdaysThoughts – How Borrower Paid Works!! Disclaimer, today’s video does not address “how” an individual LO or Broker is paid. Today’s video goes over the different type of compensation structures that are allowed on a Brokered loan. My advice is only that each Broker should have a separate agreement for compensation to their loan officers written out and signed. From a wholesale level, no LO should be able to say, I get paid more to send it to X lender than you. That can’t exist. What we talk about today, is the lending laws that allow a Brokered loan to be charging the borrower directly (Borrower paid) or paid by the Lender paid compensation election. (Lender Paid)
I detailed some of the advantages of being a mortgage broker yesterday, and today I go in-depth on one of those advantages a #MortgageBroker has, going borrower paid on a loan. Some Broker’s do this all the time, some Broker’s just don’t know how. Borrower paid is actually the best way to structure a loan for a client, only due to the enhanced tax benefits they can get. (from a consumer stand point) From a LO/Broker stance, you have more flexibility to adjust numbers and give a credit if there’s a need to do so. Hence closing the loan. ↓
The biggest thing to remember on a borrower paid loan is that the credit can only cover the actual third party costs on the loan. It can NOT cover the compensation. So it’s important to look at the credits as DOLLAR AMOUNTS, not fractions and percentages. In other words, what number is really 2.5% back to the client. And is that over the actual costs or not? Based on the loan amount, that end number will vary.
At the end of the day it’s all about structure, loan structure and the details of the transaction will always be the heart of the equation. When a Broker/LO goes Borrower paid, they simply have more flexibility to make the structure work that they sold to the client in the beginning. Making loans work is how they close. When they close that’s when every one involved gets paid.
If you have questions about Borrower paid or Lender paid transactions please feel free to email me —CLICK HERE. I’m here to help.
As always –