Bank, Banker and Broker - What's the difference in 2017?
By:
Selene Garcia
As you move through the mortgage process, you may have been inundated
with information about the mortgage and banking industry and from your
vantage point, a lender is a lender. However, in an effort to offer
clear, simple mortgage education, Guaranteed Rate wants you to know not
every lender is created equal. Distinguishing the differences between
banks, mortgage bankers and mortgage brokers can save you some
frustration, time, and in some cases, money.
As a mortgage banker and broker, Guaranteed Rate understands how the
following types of financial institutions impact your mortgage
financing. Let’s take a look at the characteristics of each:
Banks
Banks are typically local brick-and-mortar financial institutions
which offer mortgages as well as traditional banking services, such as
checking and savings accounts, along with other financial services such
as wealth management and investment advising. The law requires that
banks use a percentage of their deposits for lending purposes. Interest
earned from loans allows a bank to lend money for many types of loans
such as: auto, personal and mortgage.
Advantages
|
Disadvantages
|
- Competitive rates.
- Physical presence for servicing issues.
- Flexible lending due to long-term business relationship.
- One stop shop for all of your financial needs.
|
- Conservative lending guidelines.
- Limited loan options.
- Lengthy processing time.
- Underwriting and appraising managed through national channels vs. local channels.
|
It is important to know bank mortgage advisors are often not
well-versed on all possible mortgage lending options and do not have the
lending flexibility of a banker or broker. The reason for this is
two-fold: bank employed mortgage advisors are not required to attain
federal mortgage licenses and are usually limited to the
mortgage products
their bank sells. Additionally, unlike true licensed loan officers (who
are employed by bankers and brokers), mortgage advisors from your local
bank earn a salary and do not have to cultivate consumer relationships.
Mortgage Banker
Mortgage bankers are a one-stop mortgage shop of sorts. With access to lenders such as
Fannie Mae,
Freddie Mac, Wells Fargo and Chase, bankers are able to offer a vast array of home loans such as
Conventional,
Jumbo,
FHA,
VA and
USDA.
Unlike banks, mortgage bankers concentrate solely on mortgage lending
without the distraction of other lending products or personal finance
services. They typically employ in-house
underwriters
and loan processors; however in this case, in-house loan processing
translates into accelerated loan processing – this allows them to close
loans within 30 days or less.
Advantages
|
Disadvantages
|
- Competitive rates.
- Variety of flexible loan options.
- Swift loan processing.
- One-stop mortgage lending shop.
- Local Appraisers.
|
- No other financial instruments.
- No physical presence for servicing issues.
- No flexible lending due to long-term business relationship.
|
When you conduct business with mortgage bankers you are working with
federally licensed professionals. Licensed loan officers have chosen to
sell mortgages
as a career and are well-versed in lending laws, lender guidelines and
are 100 percent vested in counseling you, structuring your loan and
closing the deal.
Mortgage Broker
Mortgage brokers are federally licensed firms or individuals who sell
loan programs on behalf of lenders. Loan officers who work for mortgage
brokers facilitate your search for the most suitable mortgage product
and structure your loan to suit your financial goals. The main
difference between a mortgage broker and mortgage banker is that
mortgage brokers do not process any loans – every loan is sent to the
lender for processing. Additionally it is the lender, not the mortgage
broker, which provides the funds for your loan.
Advantages
|
Disadvantages
|
- Competitive rates.
- Flexible non-traditional loan programs.
|
- No in-house loan processing.
- No physical presence for servicing issues.
- No flexible lending due to long-term business relationship.
|
Interestingly, a broker and banker can be one in the same. So here is
where it gets tricky, from a consumer’s perspective, a broker is
anything that is not a brick and mortar bank; however, from an industry
perspective, this is how the two are defined:
Mortgage Banker: Lends you money using a warehouse line of credit and processes your loan.
Mortgage Broker: Sends your loan file to a lender who will lend you money and process your loan.
If the two types of institutions are combined, the consumer can benefit with a wider variety of mortgage financing options.
What about online lenders?
Online lenders are structured as both bankers and brokers. The only
difference is, all of their business is conducted online. You will not
meet face-to-face with your loan officer and you will securely submit
all of your loan documents electronically.
The type of financial institution you choose should suit your financial needs and goals, offer a competitive rate, employ
seasoned mortgage professionals and provide top-notch customer service.