Mortgage Broker vs. Mortgage Banker - Information and Advice

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Mortgage Broker vs. Mortgage Banker
by William Bronchick

Many consumers assume that “mortgage companies” are banks that lend their own money. In fact, a company that you deal with may be either a mortgage banker or a mortgage broker.

A mortgage banker is a direct lender; it lends you its own money, although it often sells the loan to the secondary market. Mortgage bankers (also known as “direct lenders”) sometimes retain servicing rights as well.

A mortgage broker is a middleman; he does the loan shopping and analysis for the borrower and puts the lender and borrower together. Many of the lenders through which the broker finds loans do not deal directly with the public (hence the expression, “wholesale lender”).

Using a mortgage banker can save the fees of a middleman and can make the loan process easier. A mortgage banker can give you direct loan approval, whereas a broker gives you information second-hand.

However, many mortgage banks are limited in what they can offer, which is essentially their own product. In addition, if you present your loan application in a poor light, you’ve already made a bad impression.

I am not suggesting you lie or mislead a lender, but understand that presenting a loan to a lender is like presenting your taxes to the IRS; there are many ways to do it, all of which are valid and legal.

Using a mortgage broker allows you to present a loan application to a different lender in a different light (and you are a “fresh” face).

A mortgage broker charges a fee for his service, but has access to a wide variety of loan programs. He also may have knowledge of how to present your loan application to different lenders for approval. Some mortgage bankers also broker loans.

As an investor it is wise to have both a mortgage broker and a mortgage banker on your team.

SIDE NOTE: MORTGAGE BROKERING.
Keep in mind that mortgage brokering is an unlicensed profession in many states. If there is no licensing agency to complain to in your state, make sure you have personal references before you do business with a mortgage broker.

Choosing A Lender
Choosing a lender that you want to work with involves several factors, not the least of which is an open mind. You need a lender that can bend the rules a little when you need it and get the job done on a deadline. You need a lender that is large enough to have pull, but small enough to give you personal attention. And, most of all, you need a lender that can deliver what it promises.

1. Length of Time in Business
Since the mortgage brokering business is not highly regulated in most states, there are a lot of “fly-by-night” operations. Bad news travels faster than good news in business, so bad mortgage brokers don’t last too long. Look for a company that has been in business for a few years.

Check out the company’s history with your local Better Business Bureau. If mortgage brokers are licensed with your state, check to see if any complaints or investigations were made against them. Also, ask for referrals from other investors and real estate agents.

2. Company Size
A company that is too big can be problematic because of high employee turnaround. Also, the proverbial “buck” gets passed around a lot. If you are dealing with a mortgage broker, it is often a one-person operation.

Dealing with a one-man operation may be good in terms of communication if he or she is a “go-getter.” On the other hand, the individual may be hard to get a hold of, since he or she is answering the phone all day.

A small to mid-sized company is a good bet. You will be able to get the boss on the phone, but he or she will have a good support staff to handle the minor details. Also, a mid-sized company may have access to more wholesale lenders than a one-person company.

3. Experience in Investment Properties
It is important to deal with a mortgage broker or banker that has experience with investor loans. Owner-occupant loans are entirely different than investor loans.

And, it is important that the broker or lender you are dealing with has a number of different programs. It is often the case that you find out a particular loan program won’t work, in which case you need to switch lenders (or loan programs) in a heartbeat to meet a funding deadline.

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Excerpt from William Bronchick's highly acclaimed book,
Buy "Financing Secrets of a Millionaire Real Estate Investor" at www.bronchick.com

William Bronchick, CEO of Legalwiz Publications, is a Nationally-known attorney, author, entrepreneur and speaker. Mr. Bronchick has been practicing law and real estate since 1990, having been involved in over 700 transactions. He has trained countless people all over the Country to become financially successful.

Related Pages

Mortgage Brokers and Lenders - How mortgage brokers differ from direct lenders - Both have advantages and can save you money - Comparisons and advantages of both types of mortgage lenders.

Online Mortgage Broker - How to use an online mortgage broker to save big on your next home loan - Advice on what works and what to avoid.

Selecting The Right Mortgage - How to choose the right mortgage based on your lifestyle - Advice on the best mortgages for different phases of life, future income changes, and risk levels.

Down Payment and PMI - How to leverage your down payment - Buy a larger home where your equity grows faster and avoid PMI using a two-loan strategy. Learn the 100% financing technique. Avoid paying for private mortgage insurance (PMI) on any mortgage where you put less than 20% down.

Mortgage Loan Broker - How to select a mortgage loan broker - Finding a mortgage broker online - Getting the best rates by using a mortgage loan broker like E-Loan.

Mortgage Broker - Questions to Ask - Questions to ask your prospective mortgage broker about home loans, mortgages, and getting the lowest mortgage rates.
 

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