In these days of tough markets and even tougher credit standards, it’s easy to get lost in the maze of mortgage financing. Particularly when it comes to shopping around for rates, how can you decide between choosing a mortgage banker or a broker? (And what’s the difference?)
For starters, bankers are employees who work to sell and process loans for their respective employers (Bank of America, Chase, Wells Fargo, etc.) Brokers, on the other hand, work with dozens of lenders (banks) as freelance agents, acting as a matchmaker between buyers and the differing loan products, standards and rates available. It pays to shop around for a solution that best fits your personal needs. Here is a brief summary of basic pros and cons of working with each:
Mortgage bankers:
- Pros: you may get pricing leverage based on an existing relationship; great if you have “vanilla” needs and fit into their box of preset standards; perhaps faster turnaround time for approval since the process from application to closing all takes place in-house; arms reach to their own underwriters to discuss loans
- Cons: often more conservative standards; don’t have to disclose commission to customers (unlike brokers); more limited product range
Mortgage brokers:
- Pros: they can compare and choose among a larger range of products and lenders based on your situation; great if you have a more unusual profile (i.e. self-employed, low credit profile, etc.); they must disclose their yield-spread premium (the amount they make on the loan)
- Cons: may not have access to products from select banks; may not have as direct an access to the actual status of the application in process
The bottom line is that you should consider both and understand what each has to offer before settling on one provider.
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so funny – i’ve actually been looking for something simple yet helpful like this post to break down the difference between the two
thanks, apples!!