What is the difference between a mortgage broker and a mortgage banker?
Mortgage brokers and mortgage bankers can help homebuyers who don’t fit the conventional mold qualify for a mortgage. Most traditional bank loans require a 20% down payment and a W-2 income history. On the other hand, mortgage brokers and mortgage bankers have access to multiple loan products to accommodate a wide range of borrowers. But what is the difference between a mortgage banker and a mortgage broker?
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Many people, including industry professionals, use the terms interchangeably, but it’s important to know the difference if you’re shopping for a mortgage.
First, it is crucial to understand that mortgage bankers and mortgage brokers both have access to a wider variety of loan products than traditional banks. “It offers advantages in terms of pricing and flexibility,” said JD Mathieu, loan originator and branch manager at mortgage broker NEXO Mortgage in San Diego, Calif. “Every situation is different, but the number of options available to brokers allows them to help a wider range of candidates.”
While mortgage brokers work with external lenders, mortgage bankers tap into internal lending products. Still, mortgage bankers often have more flexible lending options than big banks, while providing a one-stop shop for your mortgage needs, experts say. “Borrowers’ loans are secured, approved and closed by mortgage bankers,” said Corey Tyner, real estate investor and founder of Buy Yo Dirt.
This personalized service can help close loans faster. “When you work with a mortgage banker, you’re dealing with federally licensed specialists. Licensed Loan Officers have made it a business to sell mortgages and are well versed in loan laws and lender rules. They are fully invested in advising you, arranging your loan and closing the sale,” Tyner said.
On the other hand, a mortgage broker acts more like an intermediary to facilitate the loan process. Once this role is accomplished, the buyer must deal with the lender.
Another key difference between a Mortgage Broker and a Mortgage Banker is that a Mortgage Broker is paid by the buyer, while a Mortgage Banker earns commissions through the bank for each loan made.
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Mortgage brokers and mortgage bankers may offer benefits to some borrowers who find they don’t fit the conventional mold as a homebuyer, such as freelancers and independent contractors who receive 1099 income. bankers and mortgage brokers often provide more personalized service than traditional banks, since mortgage lending is their sole business.
“Mortgage bankers, unlike typical banks, are focused entirely on mortgage financing and are not distracted by other lending products or personal finance services,” Tyner told GOBankingRates.
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