The Difference Between Mortgage Brokers And Banks

by Jewel Chesson on March 19, 2012

When it comes to searching for the right kind of mortgage to meet your needs, you will probably come across a decision about who you should borrow from: Do mortgage brokers or banks make better lenders?

A mortgage broker is defined as a mediator that facilitates the process of acquiring a mortgage for individuals as well as businesses. This essentially means that they are like home loan supermarkets. Making them a convenient source of help for many borrowers are their broad access to lenders as well as their wide offering of various programs. If you have less-than-perfect credit or are in unusual circumstances, mortgage brokers can still find you the type of funding you need. Since mortgage brokers will charge a broker’s fee, you need to ask about it and take into account when calculating your initial payments.

Typically, mortgage brokers will originate, process, and pass the loan on to a lender who will subsequently sell it to an investor. They will have higher closing fees and they will also take commission. Beware of gouging, as brokers have full discretion on how much they want to charge the borrower for processing the documents necessary for the loan.

These days, there are about 20,000 mortgage brokerage operations account for more than 80% of mortgages are issued by mortgage brokers in the U.S. Convenience and resources are what they offer to borrowers and this is the key to their popularity.

Mortgage banker is the term that refers either to an individual loan officer who works at a bank or to the bank itself. What they specialize in is originating mortgages and selling them to investors and continue to service them. Both the origination and servicing processes require fees, which are the two primary sources of income for mortgage banks.

A key difference between mortgage banks and mortgage brokers is that banks have more of a standardized and set approach to setting fees. Aside from being told what fees to charge, bankers are also told not to stray away from them. This will prevent the borrower from being surprised when it comes to discovering what the fees for the home loan will be and it will also allow for more stability.

Here’s the question: which is the better option? Here is the simple answer for that: whoever gets you a better deal. You should take note that there are some borrowers enjoy the comfort and help of having a mortgage banker see them through the life of their loan (though not all do) while others do not mind either way. Along with a thorough comparison of deals that you can get from mortgage brokers and bankers, this discernment should give you a fairly clear idea of which path to take.

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