Can someone explain the difference between using a mortgage broker, mortgage lender, & a bank for refinancing?

Question by bayleigh789: Can someone explain the difference between using a mortgage broker, mortgage lender, & a bank for refinancing?
What are the benefits and drawbacks to each? We are refinancing our home.

Best answer:

Answer by bostonianinmo
A mortgage broker matches up borrowers and lenders. They frequently work with borrowers with difficult getting standard financing. Mortgage brokers have to turn a profit somewhere and that usually results in higher fees or interest rates.

A mortgage lender is anyone who lends money for real estate financing. It could be a bank, credit union, finance company, a firm that specializes in mortgages only or even a private investor. The term is too generic to list any benefits or drawbacks.

A bank is just another source of potential funding. Most banks prefer to limit their portfolios to lower risk borrowers though some smaller ones will specialize in their own geographic area and may be more willing to lend to local borrowers with less than sterling credit. Banks are more tightly regulated than some other sources of funds so their criteria has to be somewhat tighter than others.

If your credit is good, you generally should steer clear of brokers. Credit unions and local banks are my preferred source but the big national banks and lending chains like sometimes can offer the best deals. My current refi was with Ditech (a division of GMAC) and was the clear winner at the time that I refinanced but their current best isn’t quite as good as what my credit union is offering.

The short answer is to shop around for the best deal. Don’t worry about multiple applications messing up your credit score, either. Multiple queries for the same product in a 30 to 45 day span of time are scored as a single query and will NOT hurt your score.

Know better? Leave your own answer in the comments!

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4 Responses to Can someone explain the difference between using a mortgage broker, mortgage lender, & a bank for refinancing?

  1. josephcodner says:

    banks work on the retail side and brokers work with those same banks on the wholesale side. I can assist you with your refinance, I’ll give you a free evaluation to let you know exactly what I can do for

  2. paolipete123 says:

    mortgage lender and bank are the same thing. anybody who will lend you money

    broker is a person who is paid to bring borrowers to lenders. they make money off the transaction. fequently you can get a better deal by investigation without a broker.

  3. Digger says:

    The short answer is that a broker searches wholesale lenders to find the best loan program and/or rates for you. A banker and a lender are the same thing, except when you’re talking about an actual bank like Bank of America, Wells Fargo, etc. A lender/banker usually has better rates but may have fewer programs. The rates are better, because although they have the same wholesalers, their relationships are different. Lenders have a correspondent relationship, which means they underwrite the loans and sell them on a warehouse line of credit. A typical borrower doesn’t know this and usually doesn’t care, except that the interest rate is usually lower with a lender. However, you may have slightly higher closing costs because the lender will have to pay interest on the line of credit. Usually the lower interest rate more than cancels out the higher costs. If you want an experienced banker/lender, contact Julie at


  4. Skip says:

    #1 A mortgage broker- is a company that has signed an agreement with many lenders that have funds to lend on real estate. The mortgage broker then find clients needed real estate finance and match their needs and qualifications up to one of the lenders they are signed up with. Mortgage brokers normally have no funds of their own to lend. It does not normally cost any additional amount of money to go through a broker as it does to go to a bank.

    #2 A mortgage Banker/Lender- is a company that could have thier own funds to lend, and will do in some instances.
    They are also signed up with many lenders as the mortgage broker and matches client’s reguirements with lenders. It does not normally cost any additional amount of money to go through a mortgage/lender as it does to go to a bank.

    #3 A bank- Has their own funds to lend, very seldom will use other lender’s money to fund a loan. They sell their mortgages to huge government and private investors so they can have additional money to lend.
    The could very well be signed up by a mortgage broker and mortgage banker/lender who promote their loan products.

    The advantages and disadvantages

    The mortgage broker and mortgage banker/lender has more products and underwriters available than a single bank. They handle people with excellent credit as well as those that are credit challenged. If these two companies have a problem with one underwriter they can simple prepare an additional loan package for a new underwriter. You do not have to start over again, nor do you have to pay for an additonal credit report or appraisal

    Now if you go to a bank and apply, if there is a glitch of any sort and for some reason you miss qualifying for some reason. You have no other options with them. if you go to another lender or bank they have to start all over with a new application. You will be required to get an additional credit report and an appraisal.

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