Mortgage Broker vs. Mortgage Banker

One of my clients asked a great question today - and I thought it would be good information to share here.

Q: What is the difference between a mortgage banker and a mortgage broker? You send me information for three people - two are brokers one is a banker. What should I do?

A: I nearly always send clients the names of three professionals that I have first-hand experience with when I'm asked for a referral - whether it be for a mortgage, plumber, furniture restoration, etc. I think it's always best for people to call all three, and be completely up front about that fact when they have that first conversation with a provider. At the end of the calls, you then have a decent feel for what it will be like to work with these individuals, and can make your choice based on who you feel best about. Remember - I will only send you referrals for people I have first hand experience with - I call them Strategic Alliance Partners. They WILL take good care of you!

Now to answer the specific question about what the difference is between the broker and banker....

According to the National Association of Mortgage Brokers, a Mortgage Broker is "an independent real estate financing professional who specializes in the origination of residential and/or commercial mortgages." There are, according to NAMB, approximately 20,000 mortgage banking firms nationwide.

In essence, mortgage brokers know where the money is. Rather than lending their own funds, they lend money from other sources such as banks, pension funds, insurance companies, and savings and loan associations. They find competitive mortgage pricing from various mortgage companies, insert their individual profit, and ask for that profit at closing. The theory is that because a mortgage broker has access to multiple lenders, they have the ability to shop for the best rates AND the best programs for your specific need.

A mortgage banker is different. A mortgage banker, says the Mortgage Bankers Association of America, is "an individual, firm or corporation that originates, sells and/or services loans secured by mortgages on real property."

Normally, mortgage bankers are affiliated with a specific lender, and have access only to the products available for that specific lender. There may be programs available elsewhere that will be a better fit for your particular purposes, however the mortgage banker does not always have access to them.

The most important thing to remember about mortgages - work with someone you have been referred to and who has a proven history of getting the job done! When I review transactions that either failed to close, or where my clients were not as happy with the outcome as they could have been, it 9.9 times out of 10 it was due to working with a mortgage professional that did not put our clients interests above their own or simply was not taking care of business even with the constant follow up that I provide for every client. In every single instance, the client worked with a friend of a friend or someone they found online.