What's the difference between a broker and a lender?
Cynthia E. Brodrick

The mortgage broker has access to loans from various banks and institutions whereas the lender can only offer loans from his or her financial institution.

Because of his access to about 30 lenders, Anderson says, "I can be as big as the biggest bank with as much product and price. And as small as the smallest bank by providing great service." The mortgage broker can "shop around" and find the best mortgage deal for you, rather than you calling several banks yourself. Anderson claims that 75 percent of house mortgages are done through brokers. He adds, "We're everywhere. We're making the banks compete with us."

"The line between the two has grayed out lately," explains mortgage banker Dahlgren. He says the traditional difference is that lenders have the financial wherewithal to provide the loan money and close the loan themselves, whereas brokers typically don't have that money. Though the broker may originate the loan, it would be closed in the name of an investor. Dahlgren adds, "Today some brokers have limited warehouse lines [to float loans]."

Additionally, some lenders sell the loans they make to other companies rather than maintaining them themselves. Brokers automatically sell their loans to others.

Dahlgren recommends that you compare the rates and fees of banks and brokers. He says, "Brokers may offer the same rates and points, but they may have extra fees."

-- Posted: Aug. 26, 1999