Mortgage Broker vs Mortgage Banks: What’s The Difference?
If you’ve Googled mortgage companies, you may have noticed that not all mortgage lenders are the same. On one end you have mortgage banks, and on the other, you have mortgage brokers – Both eager to tell you why they are the best home for your next mortgage loan! Then some mortgage brokers operate as a correspondent lender.
My company and myself operate mostly as a correspondent lender, and we think it’s the best option! Yes, I am biased in that opinion. What to know why – let’s connect by phone and I will explain why. 262-754-3331 or 608-227-2005. Most people say it makes sense once they can ask questions to understand why.
So, what’s the difference? Well, let’s have a look!
Mortgage Broker Who?
A mortgage broker is someone who acts as a sort of middleman, between you (the homeowner) and the actual mortgage lender. They help you to prepare loan applications, financial documents and can issue pre-approvals. Mortgage brokers work with various lenders and banks and have the ability to shop around and get creative with your mortgage options. The broker will also take care of all paper-work, and work as your advocate to get approvals and exceptions where normally you might run into trouble.
As I mentioned above, some brokers operate as a correspondent lender. This type of lender does what a broker does, but the correspondent lender also handles the processing, underwriting and uses their own funds to start the loan the day you buy the house or refinance.
Okay, so what about the banks then?
So mortgage banks actually fund the loan internally. If you work with a bank, they’re going to set you up with their own loan programs. Often times they’ll offer excellent rates too, but only if you meet their more strict minimum credit requirements. A bank tends to be more limited in available loan options available to you. They do handle the processing and underwriting in house as well as servicing. (Servicing is who you write your monthly mortgage payment too.)
But who’s giving me the best deal?
So this is where your head might start spinning – Trying to figure out where you will get the best deal! Unfortunately, it’s not that cut and dry. We’re not dealing in absolutes here, as a mortgage broker will tend to offer better variety and options – And sometimes even a better overall loan since they can compare multiple lenders at once, and tend to have the experience to know where you’ll get the best deals.
However, the mortgage banks will typically give you the comfort of knowing you can walk into the bank you make payments too. But the banks also tend to have stricter requirements, and less flexibility. Once again, I have to reiterate that all of this is simply a rule of thumb – Not set in stone!