What is the difference between a mortgage broker, banker and lender?
A mortgage lender is a financial institution from which you receive money to purchase a home. A lender gets the money from investors or its own customers if it is a consumer institution such as a bank. A bank can be a type of lending institution. A credit union, a mortgage lender, a stock brokerage or a savings can trust can all be lenders. Any institution can be a lender if it has the money and has complied with the right regulations.
A banker is a person who works for a bank. If that bank is a lending institution, the banker may secure a loan for you from the bank. A banker will not secure a loan for you from any institution other than his or her own employer bank. This is one of the major differences between a mortgage banker and a mortgage broker. A mortgage broker is a person whose job it is to bring together lenders and borrowers. For a commission, a mortgage broker will work to secure a loan for you from any lending institution with which he or she has a working relationship.
What's the difference to you? Well, mostly you get a lot more personalized service with a mortgage broker. A mortgage broker evaluates the borrower's financial situation to connect him or her to a lender that is right for her. For instance, if Jenny J has excellent credit, a mortgage broker will steer her away from a lender that specializes in sub-prime loans. A mortgage broker will work to facilitate your loan application because the broker doesn't get paid until you do. An agent of the lender, such as an employee, has much less incentive to close your loan because while he or she may not get performance-related bonuses, he or she still receives a salary and will be able to eat. Remember, an employee of the lender has the lender's best interest in mind, not yours. Accordingly, a banker might hold up your loan application if the bank has a question about why houses with basements are so much more expensive in Arizona than they are in Illinois. You can alleviate some of the geographical communication issues by applying for your loan in a local branch instead of online or over the phone, but still, a manager in a distant office can hold up your application for any question. A mortgage broker works to find lenders who understand the specifics of your geographical area and so won't hold up your application with questions that are obvious to everyone, and the mortgage broker will work to answer these questions quickly.
So, working with a mortgage broker may cost you a little more in terms of having to pay a commission, but it may well be worth it in the long run to have a broker hunt out the best interest rates or lowest closing costs.