Mortgage Brokers VS Mortgage Bankers

You’re just swinging in your hammock on a sunny summer day when an ad pops up on YouTube for home equity loans. It sounds like a pretty good deal and you have been wanting to put a pool in for years, but it’s a bank you’ve never heard of, and a quick message to your group chat reveals that no one you know has, either.

What you might have witnessed was an advertisement for a mortgage broker. Like a mortgage banker, a mortgage broker can find a mortgage loan for your situation, but that’s where the two start to diverge.

Brokers and Bankers and Mortgages, Oh My!

Let’s start with some simple explanations just so we’re all on the same page.

Mortgage Bankers are people who work for a specific bank, like Main Street Bank USA, and help customers of the bank (and potential customers) apply for mortgages that Main Street Bank USA funds. They only write loans for their employer, except in a few special cases. They’re typically paid a salary by the bank they work for, whether your loan is $50k or $500k.

Mortgage Brokers, on the other hand, have permission to sell loans from a portfolio of wholesale investing clients. These may be traditional banks like Big Bank USA (these are fake banks, just so we’re clear), or they may be investment groups like In It For The Interest, LLC. There’s nothing inherently wrong with this, but because a broker makes their money solely on commission, unscrupulous ones may be tempted to put their own interests above yours. Always vet any type of lender, for peace of mind, if nothing else.

How Mortgage Bankers Work

Mortgage bankers may have a more limited product line they can use to finance your home-related loan, but they have a great deal more control over them because all the underwriting is done within the bank itself. Your local branch might not originate loans, but there’s someone nearby that your banker can call to check status and collaborate with to solve problems like a loan that you’re all by a hair’s width from being able to qualify for.

When a banker takes your application, they may literally forward it to the next room, where local people get to work to verify your income, length of employment and so forth. If you have your checking account with the same bank, you can often skip the tedious submission of income document after income document, since they can pull a lot of information from that checking account.

When the underwriter is comfortable that you’re able to qualify for the loan you’re seeking, they call the title company that you (or you and the seller, in the case of a purchase) agreed to use. They probably already have a relationship with this company since it’s nearby. When they send documents over, the title company doesn’t wonder what to expect from your closing.

How Mortgage Brokers Work

Mortgage Brokers take your application up front, then shop their lenders to see who can make you the best loan based on your credit history, income and desired loan amount. Often, brokers can do things that bankers can’t, even though a banker knows the loan originator by their first name. For example, helping people with troublesome credit is sometimes an area of specialization for brokers. They have access to all sorts of unusual loans that can turn a hopeful into a homeowner, or at least a pool owner.

This is both bad and good. On one hand, you got a loan — woohoo! — but on the other, you’re going to pay for it. These kinds of loans are rarely cheap because the broker’s fees have to be figured into the equation somewhere. Remember, they get paid on commission, not on salary. A normal broker fee can be as much as two percent of your loan amount.

When a mortgage broker pulls off a miracle you were really counting on, though, that two percent seems pretty cheap. Really, it’s all relative to your needs and what’s realistic for your financial situation. Before you choose a broker, make sure that you’ve really vetted them because each company and broker can be as wildly varied as the portfolios they have to sell. Ask around, check online reviews, ask your Realtor their opinion. Chances are good that someone knows a reputable broker that they can set you up with rather than letting you jump in blind.

Which to Choose… and Where to Find Them?

If you’ve decided that you’re absolutely committed to putting in that pool this summer, you’ll need a reputable lender to help you finance all the cement and whatnot. Luckily, both mortgage bankers and mortgage brokers are members of the HomeKeepr community! Log in to see who your Realtor recommends and then give them a call. You’ll save time in lender meet and greets, letting you trade that hammock in for a pizza slice shaped raft sooner.

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Marc Iafrate, MBA
Broker/Owner
Capital City Real Estate Group
powered by eXp Realty
(919) 390-7810 Office
8319 Six Forks Road, Suite 201
Raleigh, NC 27615

About Capital City Real Estate Group, Inc.

Moving to North Carolina years ago was the best decision my family and I could have made. We were looking for a change from the cold Michigan winters and the volatile economic climate. The Triangle was the perfect choice with its mild winters, quality of life and diverse economic base. I have always held as my personal values and guiding principles: Professionalism, Integrity, Dependability and understand the meaning of perseverance! I began my real estate career in 1996 as a commercial investor. This led to a Director of Property Management position for multi-family and commercial property and now, residential real estate as the Broker/Owner of the Capital City Real Estate Group, Inc. - eXp Realty here in Raleigh. I put myself through the evening MBA program at the University of Michigan while working full time and raising a family. Prior to real estate, I earned a Master of Science in Engineering from U of M and currently hold 2 U.S. Design Patents and had a successful corporate career in the automotive industry. As a result of that experience, I've successfully been able to apply my problem solving ability to business. Community Involvement Wake Forest Downtown, Inc. Board of Directors Wakefield Rotary Club of Wake Forest, NC Board of Directors Rotary Club President-Elect Rotary Club Secretary position Paul Harris Fellow In addition to the Rotary Club, I support causes which strengthen our local community such as the YMCA - We Build People Program and Habitat for Humanity My wife's favorite charity benefiting children is The Angel Tree We participate in our church food and clothing drives to benefit our local community We also support the American Cancer Society, the Alzheimer's Association and the Humane Society Professional Associations North Carolina Real Estate Broker License South Carolina Real Estate Broker License National Association of Realtors (NAR) North Carolina Association of Realtors Raleigh Regional Association of Realtors Coastal Carolina Association of Realtors We are committed to delivering outstanding customer service! Marc Iafrate, MBA Broker/Owner Capital City Real Estate Group, Inc. powered by eXp Realty Raleigh, NC

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