Mortgage-Banker or Mortgage-Broker?

Most people use the term Mortgage Broker when they are talking about a lender. There can be a huge difference between the two.

A Mortgage Banker is one who uses their own money to close the loan -- Bank of America, GMAC Mortgage, etc. are examples.

The good:

• Potential for great service throughout the transaction -- they process, underwrite and close the whole enchilada.
• They may choose to service the loan, so you stay with them after you close.
• Extra services may be offered to you during and after the transaction.

The bad:

• Their rates may be higher because they have huge overhead.
• You may not get that cozy feeling that people like when they go through the mortgage process.

A Mortgage Broker is typically a middle man between the borrower and the "investor" that the loan will get placed with. These companies can be anything from a guy working out of his house to a big company with numerous loan officers.

The good:

• Brokers are often setup to do business with numerous investors (mortgage companies) so they may come up with slightly lower rates than mortgage bankers.
• Being setup with numerous investors can allow them to offer some seriously creative financing for those in need.
  

The bad:

• Brokers typically have less control over the transaction since it will almost always be underwritten and closed by the investor.
• Brokers may spread their business out over various investors, so when a favor is needed for a last-minute closing for example, it may be harder to make that happen.

[Sandwiched] in-between these two ways of doing business is an Independent Mortgage Banker, like Cunningham & Company.

We are setup with numerous investors (like a broker) so our rates and product offerings are great, but since we close the loan in our name (as a banker) we are able to control the transaction and regularly offer a great service level.