What's the Difference Between a Mortgage Banker and a Mortgage Broker?
Both a mortgage banker and a mortgage broker can help you buy a home. So what’s the difference between the two—and more importantly—which one might be better for you?
Mortgage bankers are direct lenders.
A mortgage banker works directly with the lending institution (such as a bank) that provides the money for your mortgage. He or she can obtain funds only from that institution and is responsible for all aspects of the mortgage process, including evaluating the property, gathering your financial information, advising you of various mortgage options and overseeing the application process.
Mortgage brokers shop several lenders.
A mortgage broker functions like a “middle man” between you and the lending institution. Unlike a mortgage banker who has only one source of mortgage funding, a mortgage broker has several. For example, a broker might compare mortgage options from a nationwide commercial bank, a community bank and a local credit union. A mortgage banker can’t do that.
A broker will work with your real estate professional and you to determine your mortgage needs and then will “shop” for the best loan package to meet those needs. While a broker will do much of the paperwork, the lender decides whether you qualify for the loan and what your interest rate and mortgage terms will be. A broker can’t make those decisions.
Which is best for you: mortgage banker or broker?
If you don’t have time to shop for the right mortgage, a broker can save you a lot of time. He or she can also handle a lot of the paperwork and interaction with the lender. Also, if you have had any credit issues in the past, a broker may be able to navigate the mortgage process more effectively than you might do on your own—helping you find the best mortgage solution for your financial situation. Brokers are expected to understand the lender’s mortgage underwriting guidelines and can spot any issues with your loan application before you submit it.
While a mortgage broker can’t approve your mortgage, a mortgage banker can. Remember, a mortgage banker works for the lending institution that is providing the money for your mortgage. That can make the difference between a “yes” and a “no” when there’s a gray area that requires an exception or subjective decision. Also, if you already have a long-term relationship with the lending institution, you might get more favorable treatment.