Mortgage Broker vs. Retail Bank

When you're looking for a mortgage loan, you may work with a large retail bank or you may choose to work with a mortgage broker.  People often confuse the two job types even though both will glean the same results: obtaining financing for a new home or investment property. However, it is important to understand the difference between the two types of roles so you know what to expect from them during the mortgage application process and how to choose the best match.

A mortgage broker is an individual or firm that acts as an independent agent for both the borrower and the lender of a mortgage loan.

Mortgage brokers are the middle man between you and the lending institution, which can be a bank, trust company, credit union, mortgage corporation, finance company or even an individual private investor. A mortgage broker will analyze your financial situation to determine which lender is the best fit for your loan needs. He or she will submit your mortgage application to one or more lenders in order to sell it, and works with the chosen lender until the loan closes.

The mortgage broker has a wholesale relationship with lending institutions that they represent and is paid a commission for finding a client and then packaging the loan with all the documentation required. The mortgage broker is another distribution channel for lending institutions.

 A retail loan officer is a representative of a lending institution, such as a bank, who works to sell and process mortgages and other loans originated by their employer. They often have a wide variety of loans types to draw from, but all originate from that specific lender which limits the options available.

Also known as a loan representative or account executive, mortgage brokers represent the borrower to the lending institution and will guide him or her through the selection, processing and closing of the mortgage loan. Mortgage brokers can be paid a commission or salary for their services.

Usually mortgage brokers can find a better rate for their clients as they can "shop" and compare doing the work for the borrower to find the best deal and loan program from 150+ lenders rather than one company. Mortgage brokers can find loans for people with less than perfect credit to perfect credit as well as for investors looking for high loan to value (LTV) and creative financing. Mortgage brokers are a distribution channel for lenders and we can complete a loan generally much less expensive than the "bricks and morter" banks.