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 work individually with borrowers to process the loan application.
- The broker is independent and searches for a loan based on his customer's needs, not his employer's needs
- The broker matches his client with a lender, then walks the paperwork through final approval and funding.
- Brokers' fees are paid by the lending institution, so are of no consequence to the buyer.
Bankers:
- Mortgage bankers are direct lenders. Working with them eliminates the middleman.
- Mortgage bankers themselves approve or reject loans and may use automated underwriting systems, so working with a banker may prove more expeditious.
- 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.
- Because they are competing with both other bankers and brokers, mortgage bankers have no choice but to maintain competitive rates.
The recent crackdown on mortgage lenders due to bad lending practices and numerous foreclosures has caused many in the public, particularly sellers, to take a step back and become more cautious of who they use for their financial lending needs. In the past several months I have heard of numerous occasions where everyone shows up to the closing table but they were unable to close because there were no funds.
More than ever it has become imperative that sellers and buyers choose wisely when deciding what lender to use. Never shop rates!! Shop "good faith estimates." And, more importantly shop for established companies with direct underwriters. This will increase your chances of leaving the closing table with a successful sale.
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