Buying a house and applying is incredibly confusing, especially if you’re a first-time buyer who doesn’t have much idea about these sorts of things.
Unfortunately, it’s not just as simple as finding a house and putting a deposit down on it and there are so many different stages and people involved in the process of buying and selling a house.
Two individuals you may have come across in your home buying process already are mortgage bankers and mortgage brokers, the two have very similar roles, and both aim to help individuals get a mortgage to buy a new home.
There are some differences between the two roles, however, some of which may be more beneficial to your circumstances and financial situation.
So if you’re interested in knowing the difference between a mortgage banker and a mortgage broker then keep on reading.
What Is A Mortgage Banker?
A mortgage banker is someone who provides mortgage loans to homebuyers using the funds of a financial institution that they work for. They normally work in the loan department of a bank, credit union, or loan association.
A mortgage banker will only be able to provide you with loans from their institutions, which may result in you getting a bad rate or deal as you won’t be shopping around at other lenders to see if you can find a better one.
They often work with the realtor of a property and the individuals seeking to buy the home and will work beside them throughout the entire process of buying the home.
The mortgage banker will be able to act as an adviser to the people seeking a loan and will be able to guide them on the best deal they can get through their institution’s loan options.
They are paid by the financial institution through a salary, however, some will be given bonuses for good performances and there may be financial incentives.
– They work with the homebuyer throughout the entire loan and buying process
– You may be able to negotiate your interest rate with your mortgage banker
– May not get the best deal as limited to just one financial institution
– They offer very few loans
– It may take longer to find a mortgage banker that will approve you for a loan
What Is A Mortgage Broker?
A mortgage broker is an in-between or intermediate person between you and the lenders. They facilitate loans from other financial institutions to the home buyers but will shop around in the process to find the best deal for you, saving you the hassle of having to do it yourself.
They are licensed professionals and will need to have your mortgage application along with supporting financial documents and credit reports so they can see and know what kind of rate and deal you’ll be eligible for from a lender.
They can also offer counsel to the people seeking the loan and offer them advice on what would improve and strengthen their mortgage application so they can get a better rate from lenders.
Mortgage brokers will typically work for an independent company so they can go with multiple lenders in comparison to a mortgage banker who will only be able to offer a loan from their financial institution.
The broker is not the one who lends the money, they just facilitate the loan between the lenders and the people seeking the loan.
They get paid by the lenders after the loan on a home has closed and sometimes the person borrowing money from a lender will be the one to pay the broker’s fee up-front at closing.
It’s important to double-check before going with a particular mortgage broker to see if the lenders will be the ones to pay the broker’s commission or if you will be required to pay additional fees for their services.
– They have access to more lenders and will be able to provide the best rate and loan for you
– How much the broker gets financially is disclosed at closing
– They’re more expensive and the broker will need to take a fee or commission from the closing
– Having a broker can make the process longer
– Brokers have less control over the underwriting process and are often out of the picture by this point
What Are The Main Differences Between A Mortgage Banker And Mortgage Broker?
A mortgage banker is an individual from a financial institution who will give you a loan, whereas a mortgage broker is an individual who works with a variety of lenders and will be able to shop around for the best deal for the homebuyers.
Mortgage bankers are paid a salary but may get a bonus if they hit targets regarding loans, whereas mortgage brokers will receive a commission from the lender on the closing of a home.
As a mortgage broker is the one that facilitates the loan from the lenders to the homebuyers, once the underwriting and funding process has begun, your mortgage broker may be out of the picture and you may not be in contact with them to ask them any queries you may have about the process.
However, as a mortgage bank is the one lending you the money from their financial institution, you should be able to be in direct contact with them throughout the entire funding process to ask them any questions and hopefully, the loan process will be quicker for you.
Which Is Better?
If your loan is a straightforward transaction, i.e your financial situation and credit rating are strong putting you in a good position or you’ve bought a home before and don’t need too much advice, then it may be a more seamless process to get a loan through a mortgage banker instead of a broker, and it may also save you more money.
However, first-time buyers or those who are a bit more restricted with their finances may find it more beneficial to go through a broker who will be able to find them the best deal possible.
Good brokers will know which lenders are more lenient and will be able to find you lenders who will approve you despite less positive circumstances.
Mortgage brokers are paid a commission from the lenders, however, some may also require a fee from their customers. So if you’re looking to save more money, try to find a broker that doesn’t take an additional fee.