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. Loan officers help clients with the application process and are familiar with the loans offered by their financial institutions.
Unlike mortgage brokers, these people don't compare options between institutions. Instead, they focus on helping borrowers find a qualifying loan product that they can afford. They also know the rules of the banking industry and how these rules will apply to every loan application. Mortgage brokers are generally subject to basic investor guidelines, while direct lenders can make their own decisions.
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. If a mortgage broker finds a loan that you want to continue with, they will be the middleman between you and the lender. A mortgage broker might ask you questions about your financial situation, such as your credit score and the desired interest rate. 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.
When a prospective homeowner is ready to seek a mortgage, they may decide to consult with a mortgage broker. Some lender sites, such as Rocket Mortgage, also have a search engine that will connect you with local mortgage brokers. The best way to choose between a mortgage broker, a loan officer, and a mortgage banker is to talk to all of them. They may also offer you different combinations of interest rates, points, and origination fees for certain loan products.
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 across the country. While a mortgage broker is a one-stop-shop for multiple options, their fees come from the lender, so well-qualified buyers can get better rates and commissions by eliminating middlemen. Let's take a closer look at the differences between lenders and mortgage brokers so you can determine the option that best suits your situation. A mortgage banker can originate all types of loans, so you'll have a lot of options in terms of credit products, just like you would with a mortgage broker or some loan officers.