Mortgage Brokers vs. Mortgage Bankers

Financing

What is the difference between a mortgage banker and a mortgage broker? Simply, a mortgage banker is the lender; a mortgage broker represents several lending institutions and serves as a liaison between the lender and borrower.

Which is better? Here are the benefits of each.

Brokers:  Brokers act as an intermediary and broker loans for individuals As mortgage markets increased in competitiveness, mortgage brokers gained popularity. Their flexibility in not being tied to a specific lender can enable them to help buyers find the best rates for their individual circumstances, and they can sometimes help borrowers who’ve been turned down by banks.  Brokers can also help to steer buyers away from lenders who have unfavorable terms stuffed deep within their contracts.

1) Brokers work individually with borrowers to process the loan application.

2) In some cases, a broker can get a lender to waive some or all of the various types of fees that can be associated with a new mortgage, including origination fees, application fees and appraisal fees. 

3) The broker matches his client with a lender, then walks the paperwork through final approval and funding.

4) Brokers’ fees are paid by the lending institution, so are of no consequence to the buyer.

Bankers: Mortgage bankers provide mortgages in their own names and use their own funds (or funds borrowed from a warehouse lender).  Once the mortgage closes they’ll keep the mortgage or sell it (the mortgage terms remain the same when sold). 

1) Mortgage bankers themselves approve or reject loans and may use automated underwriting systems, so working with a banker may prove more expeditious.

2) Because they are competing with both other bankers and brokers, mortgage bankers have no choice but to maintain competitive rates.

3) You can benefit in having an existing relationship, as some offer discounts if you have a checking/saving account with them

All in all, you hold the key. Shop around and compare interest rates, points, fees, down-payment requirements, etc.  Ask what the typical amount of time needed for the loan to go to underwriting and be approved once a signed sales contract is provided.  Reading reviews and asking for references can also be helpful, and ask questions about any matters of concern.  Also, ask yourself if you feel you can afford the mortgage over time well, or if issues could arise (if payments increase, for example).

    - Andrea Watkins (February 2, 2017)