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Home Buyer's Recession Survival Guide - Mortgage Broker or Mortgage Banker?

Updated on May 26, 2009

There is a lot of confusion about what the difference is betwen Mortgage bankers and Mortgage brokers. The difference is relatively simple. A Mortgage banker works for a bank and therefore is only authorized to process applications from that particular lending institution. A Mortgage broker is essentially independent and can shop around to various banks and lending institutions to whoever has the best deal.

There are a lot of pros and cons to both approaches. The Mortgage banker is a bank employee thus has direct access to the underwriter. This can mean faster decisions, quicker troubleshooting and lower fees. After all, the Mortgage broker has to make a profit somewhere! When you are going to get a Mortgage for hundreds of thousands of dollars those fees can really add up. A Mortgage broker is just a middleman. They don't have access to their own funding department and in essence, really can't do anything that you couldn't do if you decided to spend the time taking care of the research and the footwork.

The advantage to using an Mortgage broker over an Mortgage banker is that a savvy broker can dig up some really good rates by comparison shopping. The Mortgage banker is pretty well stuck with whatever rate the bank has set at that particular time. Since the Mortgage lending business is an exceptionally competitive and even cut-throat one, the difference between one lending institution and another may seem on paper as if it's only a fraction of one percent, but over the repayment life of the Mortgage that can add up to many thousands of dollars.

Therefore, the Mortgage broker can theoretically offer you a better deal that over the life of the Mortgage will still save you money, over and above the profit margin that they have to charge you to stay in business. Should the application run up on the rocks, though, the Mortgage broker is in a relatively precarious position, with the applicant screaming at them from one side, and the lending institution stonewalling them from the other. The Mortgage broker also has an advantage when it comes to various "creative" financing schemes such as "No Income Verification" or "No Documentation Required" Mortgages which the banks tend to shy from.

The Mortgage banker doesn't have to worry about red tape because they're already inside the red tape factory and have a shiny and sharp pair of scissors handy. A Mortgage banker can hypothetically solve a problem in 20 minutes that might take a Mortgage broker 20 days. Banks and lending institutions also like to deal directly with their customers rather than through a Mortgage broker, so the Mortgage banker may be in a position to be able to offer you a better rate to you directly than they would to you through an Mortgage broker, even after the broker's fees are factored in. The drawback is that if the particular lending institution that the Mortgage banker works for has their rates fixed at a point that is above average among the competition, then there is nothing that the Mortgage banker can do to drop them, and in that case you might be better off with the Mortgage broker's capacity to shop the Mortgage around.

Which one is better is a determination that can only be made by the customer. You have to know your way around, do your homework and never be afraid to ask a lot of questions in order to come up with the best deal for you. After all, it's your money.

Read The Entire Survival Guide

Home Buyer's Recession Survival Guide - The Subprime Meltdown
Home Buyer's Recession Survival Guide - The Advantage Of Renting Over Buying
Home Buyer's Recession Survival Guide - Why Rent? Why Not?
Home Buyer's Recession Survival Guide - Five Common Mistakes House Buyers Make
Home Buyer's Recession Survival Guide - Get Your Home Sold Quickly & At Your Asking Price
Home Buyer's Recession Survival Guide - Improve Your Home's Value And Sell It For More!
Home Buyer's Recession Survival Guide - Learn The Value Of Curb Appeal
Home Buyer's Recession Survival Guide - Home Staging: Valid Selling Technique Or Fraud?
Home Buyer's Recession Survival Guide - Before You Go House Shopping
Home Buyer's Recession Survival Guide - The Home Condition Checklist
Home Buyer's Recession Survival Guide - Getting A Mortgage From Different Types Of Lenders
Home Buyer's Recession Survival Guide - What To Do After You're Turned Down
Home Buyer's Recession Survival Guide - New Initiatives To Help Get You Approved
Home Buyer's Recession Survival Guide - Isn't HUD An Old Paul Newman Movie?
Home Buyer's Recession Survival Guide - Jumbo Isn't As Huge As He Once Was
Home Buyer's Recession Survival Guide - FHA Q&A
Home Buyer's Recession Survival Guide - The FHA's Credit Requirements Vs. The Bank's
Home Buyer's Recession Survival Guide - Your Credit Score And Your Mortgage
Home Buyer's Recession Survival Guide - Credit Score Confusion
Home Buyer's Recession Survival Guide - Keeping That Credit Score Nice & High
Home Buyer's Recession Survival Guide - Minimize The Interest Payable
Home Buyer's Recession Survival Guide - What Is PMI & Why Do I Care?
Home Buyer's Recession Survival Guide - The LIBOR-COFI-COSI Alphabet Soup
Home Buyer's Recession Survival Guide - REO: Get Rich Quick Or Just Waste Time?
Home Buyer's Recession Survival Guide - Obtaining Flipping Money
Home Buyer's Recession Survival Guide - Consider The Additional Costs
Home Buyer's Recession Survival Guide - What Is Escrow?
Home Buyer's Recession Survival Guide - Tips To Avoid Foreclosure
Home Buyer's Recession Survival Guide - The Changing Value Of Your Mortgage Dollar
Home Buyer's Recession Survival Guide - How To Ride The Interest Rate Spikes
Home Buyer's Recession Survival Guide - Can't Get A Mortgage? What A PITI!
Home Buyer's Recession Survival Guide - Calculating Your Closing Costs
Home Buyer's Recession Survival Guide - Mortgage Broker or Mortgage Banker?
Home Buyer's Recession Survival Guide - The Magic Of A Down Payment
Home Buyer's Recession Survival Guide - A Refinance Checklist
Home Buyer's Recession Survival Guide - Refinancing With Bad Credit
Home Buyer's Recession Survival Guide - The Self-Employed Mortgage Maze
Home Buyer's Recession Survival Guide - VA Loans
Home Buyer's Recession Survival Guide - Offset & Reverse Mortgages
Home Buyer's Recession Survival Guide - The Reasons To Not Buy An Offshore Retirement House
Home Buyer's Recession Survival Guide - How To Pay Less Than $500 A Month
Home Buyer's Recession Survival Guide - Five Easy And Cheap Tips To Save Big $ On Energy

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