Bank, Broker or Mortgage Banker: Which Type of Mortgage Lender Is Right For You?

Posted by Laine Smith on 4/10/17 10:13 AM

Topics: First Time Home Buyer home buying

When buying a home, you have a lot of choices: what type of loan you want to use, what neighborhood you want to purchase in, which real estate agent you want to work with, etc. When you apply for a mortgage, a big choice is what type of mortgage lender you want to do your financing. Will you go to your bank, find a mortgage broker or work with a mortgage banker? We’ve laid out the definition of each type of lender to help you make the choice that’s right for you.

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Mortgage Brokers

Mortgage brokers are federally licensed firms that sell loans on behalf of lenders. Brokers serve as middlemen as they find loans for clients from various lenders but do not finance the loan directly. The main difference between a mortgage broker and a mortgage banker is that mortgage brokers don't process any loans; every loan is sent to the selected lender for processing.

Bank Mortgage Lending

Banks are brick-and-mortar lending institutions, offering a wide range of financial products from personal checking and savings accounts to auto, personal and mortgage loans.

Loan officers at a bank, credit union, etc. are employees who work to sell and process mortgages and other loans originated by their employer. Mortgage financing from a bank will typically involve in-house financing, though some banks may offer government-insured loans, such as FHA, VA and USDA.

Mortgage Bankers

Mortgage bankers are a one-stop shop of various loan products. Access to lenders like Fannie Mae, Freddie Mac and government financing allow mortgage bankers to offer clients a vast array of home loans, ranging from conventional and jumbo to FHA, VA and USDA.

Compass Mortgage is a mortgage banker, which gives us a greater level of control over the loan process, because we fund and close our own loans. Most mortgage bankers, Compass included, employ in-house underwriters and loan processors, giving them the ability to approve the loans they originate.

At Compass, your loan may be sold after closing to the secondary market. Though another bank may purchase your loan, our mortgage bankers continue to oversee your mortgage and help you manage it over time.

For more information about buying and financing your first home, download our free Mortgage 101 Handbook, a great resource for first-time homebuyers.

Download: Mortgage 101 Handbook

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