Bank, Broker, or Lender?

Bank/Credit Union: Mortgages are only one of many products sold by banks.  Although banks are familiar with the local market and property types, their product selection is often limited.  For unusual properties Banks will often offer portfolio loans or loans which are kept in the bank’s investment portfolio as Adjustable Rate Mortgages.  They do this to serve their market.  Banks are not typically as aggressive soliciting mortgage business or in their underwriting decisions because it is not their only product and source of income.  Banks will often sell non-portfolio mortgages on the secondary market to other Mortgage Bankers or agencies such as Fannie Mae or Freddie Mac for long term loan servicing.

Mortgage Broker: This is a firm that is the middle man between you and the actual lending institution.  They will originate your loan and take all the steps necessary in closing the loan. They do not fund their own loans, nor do they underwrite and approve loans and provide commitment letters.  Brokers will either charge a Broker Fee or be paid a premium from the wholesale lender, or both.  Brokers usually have a wide variety of products and wholesale sources to place your loan.  They usually compete well if they can run an efficient operation and keep their costs down as a result.  Technologies such as automated underwriting systems give Brokers the ability to decision loans quickly but the loan will still require final underwriting by the wholesale lender.

Mortgage Banker/Direct Lender: They originate, process, underwrite, provides loan commitment, close, and fund their own loans with their own money.    Most have in-house underwriters, and have direct access to loan products from all the big national players. If a loan product exists, they can usually offer it.  In addition to conventional loans, Mortgage Bankers usually offer, government insured loans, first-time buyer programs and construction loans.   Direct Lenders typically bundle and sell your loan after closing to giant Fannie Mae or Freddie Mac servicing companies.  Some Mortgage Bankers hold broker licenses and can broker loans to wholesalers.  This allows them to expand their product offerings beyond that which they have the ability to underwrite in-house.