Mortgage Banker

You have a few options when shopping for a mortgage, including a mortgage banker and mortgage broker. Most people confuse the two terms or assume they are the same. Today we’ll focus on what a mortgage banker is to clarify their roles and responsibilities, which can help you to decide if a mortgage banker is right for you.

Mortgage Banker, Defined

A mortgage banker is an individual or entity that originates, funds, and sometimes services mortgage loans. Mortgage bankers use their funds or funds from a warehouse lender to fund the loans. They might keep the mortgage loan or sell it to an investor.

Mortgage bankers originate real estate loans and fund them. In other words, borrowers work with the same person and/or institution from start to finish. Mortgage bankers make money on the loans by charging origination fees  or a fee to process the loan.

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What Does A Mortgage Banker Do?

Mortgage bankers work with borrowers from the time they originate the home loan (take the borrower’s application and match them with a loan) through loan processing and closing.

Mortgage bankers help borrowers choose the right loan from the selection at their institution. They don’t have access to loans at other institutions, though, so borrowers must meet the requirements of one or more programs at the financial institution they chose.

Most mortgage bankers offer the following services through the company they represent:

Originating loans: Mortgage bankers originate loans by taking a borrower’s loan application and evaluating it. Together with the underwriting team, they’ll determine if the borrower meets the lending institution’s guidelines. Many mortgage bankers specialize in specific loan types, which is great for borrowers with unique circumstances.Servicing loans: Some lenders keep the loans they fund on their books and service them. This means they collect the borrower’s monthly payments, manage their escrow accounts, and provide payoff letters when borrowers want to pay the loan off.

Selling loans: Some lenders immediately sell the mortgage loans they originate to free up their capital. Lenders can sell the entire loan or the loan servicing rights on the secondary mortgage market. If a lender sells the loan, it changes who the borrower makes their mortgage payments to or who they call for assistance with their loan.

What’s The Difference Between A Mortgage Banker And A Mortgage Broker?

Mortgage brokers also originate loans but in a different capacity. Mortgage brokers don’t underwrite or fund the loan. Instead, they work as a neutral third party that brings together the borrower and the bank. Brokers work with hundreds of lenders, giving borrowers more options to find a suitable loan.

The primary difference between mortgage bankers and mortgage brokers is how the loan closes. Mortgage bankers close the loan in their name and use their funds (in most cases). Mortgage brokers facilitate the closing, whereas the lender itself closes and funds the loan.

Mortgage brokers can’t approve or decline a loan as a mortgage banker does. Mortgage brokers get paid a yield spread premium from the bank that funds the loan based on the interest rate the broker gives the borrower.

Next Step: Finding The Right Mortgage Lender

Finding the right mortgage lender is just as important as finding the right house. Your mortgage determines how much the house costs you over the term of the loan. These steps below can help potential borrowers find a mortgage lender and get the right mortgage.

Increase your credit score: The higher your credit score is, the more loan options you’ll have. Your credit history and score determine the loan terms. High credit scores show financial responsibility and get you the best terms, whereas low credit scores show a lack of financial responsibility and result in declined applications or unaffordable terms. It’s best to repair the credit before applying for a mortgage if your credit isn’t in good condition.

Shop around for loans: When looking at loan options, you should compare the interest rate and closing costs on an apples to apples basis (meaning, compare the same loan types). Sometimes low interest rates come with higher fees, and when you look at the big picture, it costs more than a loan with a higher interest rate. Each lender has different requirements and offers different terms, so shopping around can help you find the best loan available.

Apply for pre approval: A mortgage pre approval tells you how much loan you can afford and what lenders will require of you to close the loan. Sellers and realtors prefer buyers with a pre approval. In fact, some sellers won’t show their home or accept an offer from a buyer who doesn’t have a pre approval.