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Many first-time home buyers mistakenly assume that mortgage companies are financial institutions particularly banks that extend loans for home purchase. As a matter of fact, you may be dealing with either a mortgage banker or a mortgage broker.

What Is the Difference?

On one hand, you have a mortgage banker that directly lends its own money to potential home buyers in accordance with certain financial guidelines. Take note, however, that mortgage bankers often sell their loans to a secondary market as well as retain certain servicing rights.

On the other hand, a mortgage broker acts as a middleman between banker and buyer. Generally speaking, the broker will provide for services such as:

* Performs the legwork in finding the best possible home loan contract for their customer’s present needs and future capacities to earn and pay

* Does the underwriting of the deal for presentation to the lenders

* Recommends various professionals that may be needed in the transaction, be it a lawyer, financial advisor, property appraiser, property inspector and real-estate advisor

* Assist in securing pre-qualification for faster negotiations

* Explain the options in greater detail as well as analyze the contract in relation to your needs.

Indeed, the differences are many and so are the advantages and disadvantages of each option.

What Are the Pros and Cons?

If you choose to avail of your home loan directly from the banker, you will be able to save on the fees of the broker. Although some brokers offer their services for free to their customers, the lenders actually pay them for their services.

Also, you will have first-hand information from the banker, which significantly contributes to better communication. In a way, it makes for faster and easier loan processing especially if you know the ins and outs of the business.

However, if you are new to the business, you may have difficulty understand the jargons of the bankers. It will really take time, effort and money to find the best banker possible in your area. Plus, you will be limited in your choices as bankers can only offer what they only have – their own products

If you choose to hire a mortgage broker, you can avail of many advantages. First, you can let them do the loan shopping for you. This way, you can let the professionals handle the legwork while you find the money to make the possible down payment requirements and attend to other matters.

Second, your loan application will be presented to many bankers in different ways. In a way, you always present a “fresh face” to each and every prospective lender even if your application is less than satisfactory. After all, mortgage brokers know their stuff and that is to make you look as good as possible on your home loan applications.

Third, you have many options to choose from among the home loan offers the mortgage broker was able to secure. And you will have expert opinion on the matter of choosing, too!

Now that you know the pros and cons of the mortgage broker and banker, you should be able to make an informed decision on which one is the best for your needs.

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