Mortgage Brokers Vs. Banks
By John Kim
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When it to searching for the right kind of mortgage to
meet your needs, you will probably come across a decision about
who you should borrow from: Do mortgage brokers or banks make
better lenders?

A mortgage broker is a mediator that facilitates the process of
acquiring a mortgage for individuals as well as businesses.
Essentially, they are like home loan supermarkets. Their broad
access to lenders as well as their wide offering of various
programs makes them a convenient source of help for many
borrowers. If you have less-than-perfect credit or are in
unusual circumstances, mortgage brokers can still find you the
type of funding you need. Mortgage brokers will charge a
broker’s fee, which you should ask about and take into account
when calculating your initial payments.

Mortgage brokers will typically originate, process, and pass
the loan on to a lender who will subsequently sell it to an
investor. They take commission and will have higher closing
fees. Beware of gouging, as brokers have full discretion on how
much they want to charge the borrower for processing the
documents necessary for the loan.

Today, about 20,000 mortgage brokerage operations account for
more than 80% of mortgages are issued by mortgage brokers in the
U.S. The convenience and resources they offer to borrowers is
the key to their popularity.

The term “mortgage banker” refers either to an individual loan
officer who works at a bank or to the bank itself. They
specialize in originating mortgages and selling them to
investors and continue to service them. Both the origination and
servicing processes require fees, which are the two primary
sources of income for mortgage banks.

A key difference between mortgage banks and mortgage brokers is
that banks have more of a standardized and set approach to
setting fees. Bankers are told what fees to charge and are told
not to stray away from them. This allows for more stability and
prevents the borrower from being surprised when it comes to
discovering what the fees for the home loan will be.

Now the question is which is the better option? The answer is
quite simple: Whoever gets you the better deal. It should be
noted that while some borrowers enjoy the comfort and help of
having a mortgage banker see them through the life of their loan
(though not all do), while others do not mind either way. This
discernment, along with a thorough comparison of deals that you
can get from mortgage brokers and bankers, should give you a
fairly clear idea of which path to take.