Going through the process of purchasing a home and obtaining a mortgage can introduce one to a whole new series of acronyms and terms special to the real estate industry. Without some background knowledge about these terms, it’s difficult to determine exactly who you’re working with and what you’re considering. Some of the terms that are frequently confused are mortgage banker and mortgage broker. They perform some of the same functions, and they sound similar, so some people believe the titles are interchangeable. Understanding the difference helps to contextualize the experience and know which person is responsible for what in the mortgage equation.
Brokers tend to be very familiar with the guidelines for different lenders and they have access to many loan programs. Their primary responsibility is to process the loan package and then transmit that information to a mortgage banker or lender. The lender is the actual entity behind the loan, but the broker receives fees for loan origination and processing. As a result of this constant business, many brokers have solid relationships with multiple lenders. These close relationships sometimes mean that a loan is directly transmitted to the lender most likely to approve it. This is one of the benefits of working with a mortgage broker. A mortgage broker does not have any capital risk put up during this part of the process. The goal is to create a loan, and once that has been done, the mortgage broker gets paid and is no longer responsible for any additional parts of the process.
- Mortgage brokers typically have more options and stronger relationships with various lenders, and their bottom line is to originate a mortgage loan.
After an underwriter approves a mortgage loan, a mortgage banker funds the loans. That loan is then sold to a direct lender, netting the mortgage banker the money to fund an entirely new loan. Since the entire operation is essentially housed in the office of the mortgage banker, the process can be easier. Generally, mortgage bankers charge lower fees, too. The mortgage banker is driven by a need to sell the loan at a particular price in order to allow them to move on to their next transaction. The mortgage banker’s interest are closest to that of the borrower, since their funds are also tied in the loan and they want to see it succeed. Mortgage bankers take on the credit and fraud risk in addition, which is unlike a mortgage broker.
- Mortgage bankers complete the process typically by themselves, since their goal is to sell the loan to a direct lender and start all over again. Generally, they have lower fees.
Both bankers and brokers have experience in the field to help you through the mortgage process. Both will have the training and experience to work efficiently and effectively.