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Mortgage brokers and mortgage bankers can help homebuyers that don’t fit the conventional mold to qualify for a mortgage. Most traditional bank loans require a down payment of 20% and a history of W-2 income. On the other hand, mortgage brokers and mortgage bankers have access to multiple loan products to accommodate a wide range of borrowers. But what’s the difference between a mortgage banker and a mortgage broker?
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Many people — including industry professionals — use the terms interchangeably, but it’s important to know the difference if you are shopping for a mortgage.
First, it’s crucial to understand that mortgage bankers and mortgage brokers both have access to a wider variety of loan products than traditional banks. “This provides advantages in terms of both pricing and flexibility,” said JD Mathieu, loan originator and branch manager at mortgage broker NEXO Mortgage in San Diego, California. “Every situation is different but the number of options available to brokers allow them to assist a wider range of applicants.”
While mortgage brokers work with outside lenders, mortgage bankers draw from in-house loan products. Still, mortgage bankers often have more flexible loan options than bigger banks, while providing a one-stop shop for your mortgage needs, according to experts. “Borrowers’ loans are underwritten, approved, and closed by mortgage bankers,” said Corey Tyner, a real estate investor and founder of Buy Yo Dirt.
This personalized service can help loans close faster. “When you work with a mortgage banker, you’re dealing with federally licensed specialists. Licensed loan officers have made it their business to sell mortgages and are well-versed in lending laws and lender rules. They are entirely invested in counseling you, arranging your loan, and closing the sale,” Tyner said.
On the other hand, a mortgage broker acts as more of a middleman to facilitate the loan process. Once that role is done, the buyer must deal with the lender.
Another key difference between a mortgage broker and a mortgage banker is that a mortgage broker gets paid from the buyer, while a mortgage banker earns commissions through the bank for each loan that closes.
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Both mortgage brokers and mortgage bankers may provide advantages for certain borrowers who find they don’t fit the conventional mold as a homebuyer, such as freelancers and independent contractors who are paid 1099 income. Mortgage bankers and brokers often provide more personalized service than traditional banks, since mortgages are their only business.
“Mortgage bankers, unlike typical banks, focus entirely on mortgage financing and are not distracted by other loan products or personal finance services,” Tyner told GOBankingRates.
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