When applying for a mortgage, choosing the right lender can save you time, frustration, and in many cases, money. So when you decide to apply are all lenders - mortgage bankers, brokers, and banks - created equal? Here's how they compare.
Image courtesy of suphakit73 at FreeDigitalPhotos.net
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 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 is a mortgage banker, which gives us a greater level of control over the loan process, because we fund and close our 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.