Mortgage Broker vs. Bank | What’s the difference?
We often hear the terms mortgage broker, loan officer, and mortgage banker used interchangeably. Deep down you know they are not the same but just can never remember which is which! Today, the confusion over a mortgage broker vs bank comes to an end.
Effort vs Money
MYTH: Brokers offer the best rates because they shop around. This fallacy is often cited as the “main difference” between brokers and bankers. In reality, brokers shop for loans. Say a borrower has a less than favorable credit score. The broker will shop all the banks with relaxed credit score requirements and bring loan options back to the borrower. The borrower often pays for this time-saving service in the form of a higher interest rate.
Bankers, a.k.a. loan officers, deal directly with investors. The shopping aspect needs to be done by the borrower by applying at different banks. The payoff for the borrower is that bankers almost always have better rates than brokers. (And we’re not just saying that because we’re bankers. Consult any number of financial publications.)
How Do They Get Paid?
A mortgage broker is paid by the lender while a mortgage banker is the lender. So, a broker’s form of compensation can vary with each loan, while a banker is going to be paid according to the same model every time. And therein lies “the catch.” While we like to believe the following does not apply to most, there is the possibility that a broker’s advice will be guided by whichever loan results in the highest compensation.
The Back End
Both brokers and bankers collect documents, issue pre-approvals, and take the loan application. The path down which the loan application goes, however, is very different. Brokers do not have control over the loan once it goes into process, which strains communication and is not exactly conducive to time sensitivity. Bankers pass loans along to an in-house underwriting team who can almost always turn the loan around faster than a wholesaler.
Your Go-To Banker
You could say this article is a little convenient considering we are mortgage bankers. But, hey, facts are facts! Trust us to provide the very best rates, absolutely unbiased advice, and the most seamless buying experience.