What is the difference between a Bank, Mortgage Broker and a Mortgage Banker? A General Banker works at a bank, which typically offers services such as home loans, student loans, car loans, checking and savings accounts, as well as other types of investments. Because of the retail space and overhead, the price you will pay for a mortgage through a Banker is typically higher than the price of one through a Mortgage Broker or Mortgage Banker, as all other expenses are built into their overall rate structure. General Bankers are not specialized in home loans and in turn the process is not as streamlined or efficient as with a Mortgage Broker, or a Mortgage Banker who is dedicated only to mortgages. Bankers will also typically have limited programs since they only offer their banks’ product. If a client does not fit into their programs they will not be able to complete their loan.
A mortgage banker, however, is a direct lender who lends their own funds but only towards mortgages. Because of this, they are specialized in the home loan process and all of the efforts are dedicated to home loans. They have no other overhead, and in turn their interest rates are typically lower. Mortgage Banks lend their own money in order to control the process and at a later date they will typically transfer the servicing to a bank. This allows mortgage bankers to have multiple programs available as they can use the products and guidelines from any of the investors they work with and they are not pigeon holed into 1 set of guidelines. There is more control, more flexibility and typically lower interest rates.
Mortgage brokers do not lend their own funds; they simply shop a loan to a variety of investors. Their rates are typically lower than a Bank and similar to a mortgage banker’s. However, they do not control the process since they are depending upon the bank they shop the mortgage to. They have the option to use any of their bank’s guidelines, so they do have some flexibility. However, other restrictions are imposed on brokers since they are not lending their own funds. Brokers can shop around to help a client qualify, but will not be able to have control on the process and the rates they offer will be determined by the bank they choose not themselves.