Mortgage Brokers vs. Mortgage Bankers

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What is the difference between Mortgage Brokers vs. Mortgage Bankers

A Mortgage Banker is the lender, whereas a Mortgage Broker represents several lending institutions and serves as a liaison between the Lender and Borrower.

Which is better?  There are benefits of working with each, so you can decide which one is better for your situation

Mortgage Brokers

The National Association of Mortgage Brokers defines a mortgage broker as an “independent real estate financing professional who specializes in the origination of residential and/or commercial mortgages.”

Brokers work individually with borrowers, collecting information, documentation, and verification to process the loan application.

Once the loan package has been prepared and conditionally approved, the broker searches for an appropriate lender. Because he is independent, he has the luxury of searching for a loan based on his customer’s needs rather than the needs of his employer (bank or mortgage company)

After the broker matches his client with a lender, he walks the paperwork through final approval, escrow deposits, and loan funding.

Brokers’ fees are paid by the lending institution and therefore are of no consequence to the buyer. Most banks will allow brokers to charge up to 1% of the loan amount for compensation. Banks are willing to pay this fee to brokers because brokers bring them business and do much of the legwork.

 Mortgage Bankers…

As defined by the Mortgage Bankers Association of America, a mortgage banker is an “individual, firm, or corporation that originates, sells, and/or services loans secured by mortgages on real property.”

Mortgage bankers are direct lenders. Working with bankers can eliminate the middleman.   While brokers require final approval from lenders, mortgage bankers themselves approve or reject loans. Also, mortgage bankers may use automated underwriting systems, so working with a banker may prove more expeditious.  This helps the home buying process when timing is of the essence for the buyer and seller.

Mortgage bankers must have substantial net worth if they are to survive. Brokers, on the other hand, need only a store front and telephone in order to set up shop.

Bankers are competing with both other bankers and brokers, mortgage bankers have no choice but to maintain competitive rates. 

It's important to ask the same set of questions to anyone that a home buyer is referred to or recommended.   This first step of making a wise financial decision and understanding all your loan/mortgage options is very critical.   I have professional, experienced Mortgage Consultants both Brokers and Bankers I'm happy to refer.   I provide all my Home Sellers and Buyers will complimentary consulting to review key steps to make the home buying and selling process educational and with personalized quality care.   Buying a Home is a big financial decision, working with someone you trust is very valuable.

Contact me today to get started:  916.949.6509