To many people, the mortgage process can seem daunting, so selecting the right mortgage professional is important. That said, there are a few different types of mortgage lenders that you can choose from when shopping for a home purchase or refinance, and as time passes, market share is growing in the mortgage broker sector of the business. Below is information for both.

Types of mortgage lenders

Mortgage brokers — A broker is a ‘middleman’ that helps match you with the best lender for your needs. Brokers work with multiple ‘wholesale’ mortgage companies, so they can act as a single point person to help you compare multiple loan options, and shop for the lowest rate & cost. A mortgage broker has no “overlays” or additional underwriting requirements, making the process easier for the consumer. This is because the broker works direct with the investor.

Mortgage banks — Financial institutions that originate, process, and fund the loans themselves. In other words, the company you work with is the one lending the money. Direct lenders include big banks (like Wells Fargo), credit unions, and mortgage companies that specialize in home loans (like Quicken). Mortgage banks sell their loans, so they have tighter restrictions, and more underwriting guidelines to ensure that their loans are saleable to the end investor after close of escrow.

Mortgage banks — Financial institutions that originate, process, and fund the loans themselves. In other words, the company you work with is the one lending the money. Direct lenders include big banks (like Wells Fargo), credit unions, and mortgage companies that specialize in home loans (like Quicken). Mortgage banks sell their loans, so they have tighter restrictions, and more underwriting guidelines to ensure that their loans are saleable to the end investor after close of escrow.

Who has the best rates?

When you’re shopping for a home loan, it’s likely you want the best rate & price you can get, and while these are important factors, all loan officers and mortgage companies are not created equal, and quite honestly, sometimes you get what you pay for. In fact, some online lenders and mortgage banks pride themselves on advertising the cheapest loan available, but is it actually cheaper if it’s a tedious process, and takes 2-4 times the time to complete a transaction?

Typically, the mortgage broker has lower rates, because they have lower cost & overhead, while the mortgage bank has brick & mortar locations, layers of management, & other hard costs, eating into profits & thus requiring a higher rate for the consumer. The most experienced loan pros work either for a direct lender, or as a mortgage broker. Rarely do you find the most experienced loan people at depository banks or online lenders.