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Should you choose a mortgage broker or banker?

Many potential mortgage borrowers do not even know the difference between the terms, mortgage broker and mortgage banker. William Bronchick’s article, “Mortgage Broker vs. Mortgage Banker,” published on totalrealestatesolutions.com, explains not only the difference between the two, but also offers insight as to which one would best fit your needs.

“Many consumers assume that ‘mortgage companies’ are banks that lend their own money. In fact, a company that you deal with may be either a mortgage banker or a mortgage broker.”

“A mortgage banker is a direct lender; it lends you its own money, although it often sells the loan to the secondary market. Mortgage bankers (also known as ‘direct lenders’) sometimes retain servicing rights as well.”

“A mortgage broker is a middleman; he does the loan shopping and analysis for the borrower and puts the lender and borrower together. Many of the lenders through which the broker finds loans do not deal directly with the public (hence the expression, ‘wholesale lender’).”

Using a mortgage banker can usually save you time and money because you do not have to use a middle man. A mortgage banker can also offer you direct loan approval. However, mortgage bankers are limited in what they can offer, since they are the source.

Bronchick also offers advice that dealing with a banker is like dealing directly with the IRS. Going through a broker allows you more flexibility in your profile. He is not suggesting that you lie on your application to a broker, but he is rather warning you never to lie or misrepresent yourself to a banker. They are the IRS of mortgage loans.

A mortgage broker does charge fees for the use of his or her service, yet the broker will have a wide range of loan programs to choose from. A broker may also be able to give you information and tips on how to present your application to different lenders for approval.

“Some mortgage bankers also broker loans. As an investor it is wise to have both a mortgage broker and a mortgage banker on your team.”

Now, you probably need some help choosing the appropriate lender. Bronchick provides some tips.

“You need a lender that can bend the rules a little when you need it and get the job done on a deadline. You need a lender that is large enough to have pull, but small enough to give you personal attention. And, most of all, you need a lender that can deliver what it promises.”

There are three primary variables to consider when choosing a lender; length of time in business, company size and experience in investment properties.

“Bad news travels faster than good news in business, so bad mortgage brokers don’t last too long. Look for a company that has been in business for a few years. Check out the company’s history with your local Better Business Bureau.”

“A company that is too big can be problematic because of high employee turnaround. Also, the proverbial “buck” gets passed around a lot. If you are dealing with a mortgage broker, it is often a one-person operation.”

“It is important to deal with a mortgage broker or banker that has experience with investor loans. Owner-occupant loans are entirely different than investor loans. And, it is important that the broker or lender you are dealing with has a number of different programs.”

Brokers and bankers both cater to similar and different needs. Do plenty of research before deciding that one is better for you than the other.

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