My Bank, Mortgage Banker, or Mortgage Broker?

What is the difference between a bank or credit union, mortgage bank and a mortgage broker when it comes to seeking a mortgage loan? That is a question on the minds of many borrowers when they are getting bombarded by offers, gimmicks and endless advertisers.

What few understand is that the differences any more are very blurred. There is, in most aspects of the mortgage process, little if any difference at all. The tasks and the job being performed by either entity are very similar.

And with interest rate pricing being dictated by Wall Street (mortgage backed securities) and the secondary market, plus the fierce level of competition, the rate differences as well are as little as 1/8th of 1% from lender to lender. So how do you decide? (continued...)

What probably differentiates one from the other most shows up in the approval and closing end of each loan transaction. Most banks and mortgage bankers have the authority to approve your loan, and close and fund your loan internally and with their own funds. Brokers on the other hand, typically have to send your loan file out to a bank or mortgage banker to obtain the approval and have to request funds from that source for closing the loan as well.

That said, that entire process usually takes less than a couple of days, so you may not be affected by the difference other than a bit of time. Now, if there are even the least bit of challenges or problems on a file, having to send a file out for those functions can then be amplified by the loss of control a broker may experience over that of a bank or mortgage banker.

Check too, the closing costs for a transaction. because the broker does not earn any income from the payments or servicing of a loan, their only sources of income are fees. They can at times have more fees than a banker or mortgage banker as well. Some would argue though, that a broker has less overhead costs and the total fees charged may still be equal to or even less than a bank or mortgage bank... so be sure and check the total costs and not just the rates! Beware!