Mortgage Broker vs. Mortgage Lender
What Is A Mortgage Lender?
Lenders can be licensed professionals that give money to you directly or through a third party to finance your loan. There are many names for lenders, depending on how they get their clients and what they do after funding your loan.
Wholesale vs. Retail Correspondent Lenders
How Customers are Acquired:
Retail lenders reach out directly to customers. Wells Fargo, for example, has local loan officers who handle all aspects of loan origination. Sometimes, retail lenders are called "Direct Lenders." You can do retail lending face-to-face at a bank branch or online.
Brokers who work for a wholesale lender can fund mortgages. The brokers locate customers, take loan applications, and then sell them to wholesale lenders to fund.
A mix of brokers and retail lenders, correspondent lenders are also available. Although they technically finance loans using their own borrowing money, they often lock in rates with other lenders. They can quickly sell the loan and reduce their risk.
Mortgage Bankers vs. Portfolio Lenders
What Happens To Your Loan?
Mortgage bankers finance loans but then turn around and sell them on the secondary market to investors and agencies like Fannie Mae or Freddie Mac. To fund loans, mortgage bankers borrow money from banks and repay it when the loans are sold. Mortgage banks are the majority of large lenders, such as Wells Fargo Mortgage.
Many community banks, credit unions, and savings and loan companies are portfolio lenders. Portfolio lenders borrow money from customers' bank deposits to finance loans. This allows them to keep the loans in their portfolios and can also hold on to them.
What Is A Mortgage Broker?
A mortgage broker is like a matchmaking service. They match you, the borrower, with a lender. They will review your financial information, look at various lenders, and match you with the one that offers you the best terms and rates. There are many lenders that the broker can match you with. The downside is that the broker is no longer involved in the process once the match has been made. This means you might have trouble staying in touch with the person funding and underwriting your loan.
Loan Officers
Lender officers help borrowers find the best mortgage, and they also fill out loan applications. They usually make their money by taking commissions on loans. If the process and broker loans, loan officers can also become mortgage brokers. Sometimes loan officers are called mortgage consultants.
