The difference between a mortgage banker and a mortgage broker
Many buyers use the terms mortgage banker and mortgage broker interchangeably. While both have similar job features – and both can help you get a loan – there are differences and nuances between bankers and brokers. Understanding the differences can help save buyers time, frustration, and in some cases, money.
What is a mortgage banker?
Mortgage bankers underwrite, approve, and close loans for their financial institution. They work for a specific financial institution such as a retail bank, investment firm, or agency such as Freddie Mac or Fannie Mae. Mortgage bankers have access to a variety of loans including conventional, jumbo, USDA, FHA, and VA. These bankers focus exclusively on loans and lending instead of other financial services their institution may offer; they are well-versed in lending laws and are committed to helping structure your loan and closing the deal.
What is a mortgage broker?
Mortgage brokers are individuals who are federally licensed and work on behalf of borrowers for a variety of lenders. While brokers do not lend money themselves, they help borrowers obtain loans through retail banks, credit unions, and other financial institutions. Because brokers do not work for one lender they are able to find their clients the best rates, terms, and conditions.
The difference between bankers and brokers
The National Association of Mortgage Brokers defines a broker as "an independent real estate financing professional who specializes in the origination of … mortgages." By contrast, a mortgage banker is defined by the Mortgage Bankers Association as "an individual, firm or corporation that originates, sells and or services loans secured by mortgages."
There are a number of key differences between brokers and bankers.
- Bankers are institutional; brokers shop. A mortgage banker works in the loan department for a financial institution. He advises realtors, buyers, and loan applicants about the loan options within a specific institution. A mortgage broker works with a specific realtor or borrower to find the best loan option for them amongst a variety of lenders and institutions. Brokers can compare loans from various institutions whilst a banker cannot.
- Bankers work on salary; brokers work on commission. Mortgage bankers are paid a salary by the financial institution they work for; they may be offered incentives, bonuses, or small commissions for loans. As bankers are paid by a single institution, their loyalty is to that one bank or credit union and they can only offer loans from that lender. Brokers, however, have a responsibility to the borrower and to get them the best deal possible. Some brokers work on a flat fee, some charge a percentage of the value of the loan, and some are given a sort of commission; this is done by finding the difference between the rate the broker gets from the lending institution and the rate he provides to the borrower.
by Author, August. 18, 2020