When it comes to the mortgage business, there are some striking similarities between mortgage brokers and automobile dealers. In this blog post, we will take a look at what those similarities are, as well as how the two professions differ. We’ll also explore how both brokers and dealers make a profit on car loans and conventional home mortgages. Keep reading to learn more!

Similarities Between Mortgage Brokers and Automobile Dealers

There are a few key similarities between mortgage brokers and automobile dealers.

Licenses: First, both professions require a license in order to operate. In order to obtain a license, both mortgage brokers and automobile dealers must pass an exam that tests their knowledge of the industry.

Middlemen: Another similarity between the two professions is that both mortgage brokers and automobile dealers are middlemen. Both brokers and dealers work with banks and other financial institutions to get loans for their customers. And, like any middleman, both brokers and dealers charge a fee for their services.

Financing: In both professions, the customer is looking for financing for a major purchase. In the case of a car loan, the customer is usually borrowing money to buy a car outright. With a mortgage, the customer is usually borrowing money to buy a home.

Both mortgage brokers and automobile dealers typically have access to special financing programs that are not available to the general public. This is because they have established relationships with lenders. This allows them to get competitive prices from lenders for their borrowers. Which in turn allows the brokers and dealers to make a profit on the loan. In addition, these programs can offer lower interest rates and more favorable terms to their customers.

Differences Between Mortgage Brokers and Automobile Dealers

Though there are some similarities between mortgage brokers and automobile dealers, there are also some key differences.

Access to number of Lenders: One of the biggest differences is that mortgage brokers typically work with a variety of different lenders, while automobile dealers usually have just one primary lender that they work with.

Different Licenses: Another difference between mortgage brokers and automobile dealers is that mortgage brokers are required to be licensed by the state in which they operate. These licensure requirements vary from state to state. Automobile dealers, on the other hand, are not required to be licensed by the state in which they operate.

Profit: Another difference between the two professions is how they make a profit. Mortgage brokers typically earn a commission on the loan that they help their borrower to obtain. Automobile dealers, on the other hand, make a profit by marking up the price of the car above what they paid for it.

Expertise: Mortgage brokers also typically have more expertise in the mortgage industry than automobile dealers do. This is because their job is solely focused on originating mortgages. Automobile dealers, on the other hand, are primarily focused on selling cars. They may know a little bit about financing, but they are not experts in the field.

Overhead Costs: Lastly, mortgage brokers typically have lower overhead costs than automobile dealers do. This is because they do not have the same expenses that dealerships have, such as a physical location and a staff of salespeople.

How Mortgage Brokers and Automobile Dealers Make Money

Mortgage brokers make money by charging a commission on the loan that they help their borrower to obtain. This commission is typically a percentage of the loan amount and is paid to the broker by the lender. Automobile dealers make money by marking up the price of the car above what they paid for it. The markup is generally between two and three percent of the purchase price. In addition, automobile dealers may also earn a commission on the financing that they arrange for their customers. This commission is typically a percentage of the loan amount and is paid to the dealer by the lender.

Bottom Line

Mortgage brokers and automobile dealers have a lot in common. However, there are also some key differences between the two professions. Either way, both mortgage brokers and automobile dealers can be a good option for borrowers who are looking for financing for a major purchase. It all depends on the borrower’s specific needs and preferences.

If you are looking for mortgage financing, contact us today. We are a team of experienced mortgage brokers who can help you get the best loan for your needs.