A lender is a financial institution that lends directly to you. A broker doesn't lend money. A broker can work with many lenders. In reality, a mortgage broker won't lend you money or approve your loan application.
Rather, they help you find a lender that will. And before making the final decision among several available lenders, the broker will help you calculate and compare the long-term costs associated with different types and terms of loans. Choosing to apply for a mortgage with the help of a mortgage lender or mortgage broker is a crucial step in the homebuying process, and it's important to understand the differences between a lender and a broker when making the decision. The key difference between a mortgage broker and a lender is the work they do.
A lender lends you money, while a broker helps you find and work with a lender. A mortgage broker is a kind of matchmaker. Connect Mortgage Borrowers to Mortgage Lenders. A broker doesn't use their own money to originate mortgages.
Instead, they will act as a liaison between you and your lender and will collect the documentation necessary for underwriting and approval. For example, borrowers who use lenders such as Quicken Loans and Loan Direct can complete and obtain their approvals online. The decision between a lender and a broker depends on your personal situation and your goals when approaching the home loan process. Large lenders have a network of retail and wholesale loans, and hire several brokers to offer credit products to customers.
On the one hand, mortgage brokers often work with several lenders and can look for the best option. If you find a broker paid by a lender, be sure to do your own research to prevent your broker from guiding you to a poor lender simply because your broker commission will be higher, says Leslie Tayne, a debt settlement lawyer at Tayne Law Group. Just like contractors, plumbers, lawyers, or other independent companies, there are expert brokers who will work hard for you. The best way to choose between a mortgage broker, a loan officer and a mortgage banker is to talk to all of them.
If you're looking for a more streamlined mortgage application process, working with an agent may be the best option. People who are less qualified buyers or who buy less traditional properties will find it easier to find loans for which they can be approved through a mortgage broker than through individual direct lenders with generally stricter approval criteria. In fact, some banks and credit unions don't work with mortgage brokers and prefer to talk directly to potential borrowers. If you prefer not to receive dozens of calls from mortgage brokers, you can search for them directly through sites that bring together local and independent mortgage brokers from all over the country.
Learn the differences between mortgage brokers, lenders and loan officers so you can be informed when you take the next step. Loan officers work for companies such as banks, credit unions, or direct online lenders that lend money to borrowers to buy and refinance homes. Like some commission-based financial planners, some brokers work primarily with or support certain lenders, which could influence the options they offer you. By knowing the basic differences between three types of mortgage professionals: mortgage brokers, loan officers, and mortgage bankers, you can find out who can save you the most time and money.
For example, if a consumer goes directly to a lender, that entity charges the origination fee for the loan. .
