Mortgage bankers: Who they are and what they do
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There are many roles involved in the lending process, from the time you get preapproved for a mortgage to closing, so understanding who does what and when is important. Here, we explore what mortgage bankers do in the process of getting a home loan.
What is a mortgage banker?
A mortgage banker is a person or entity that originates, or initiates, home loans, and typically provides the funding for them. Mortgage bankers could be individuals or large companies, but in either case, they function in the same capacity. Many mortgage bankers generate revenue by charging borrowers an origination fee.
Once a mortgage banker originates a loan, the banker can keep the loan in its portfolio (in other words, on its books) and service it, or, sell it on the secondary market or sell the servicing rights to another party, or a combination of the two.
What does a mortgage banker do?
A mortgage banker has a variety of responsibilities in the home loan process. The most important is determining whether to approve a borrower for a loan, which is usually accomplished through the banker’s underwriting department. A mortgage banker’s services include:
- Originate loans: Mortgage bankers have a range of loans to offer, but some can specialize in particular types of loans, such as jumbo loans, VA loans or unusual financing options.
- Service loans: Once the loan closes, your mortgage banker might also service your loan, meaning manage the repayment process and assist you if you need help with repayment.
- Sell loans: Mortgage bankers can also sell your mortgage or the rights to service your mortgage on the secondary market. Mortgage bankers do this in order to free up more capital to make more loans to more borrowers.
Mortgage banker vs. mortgage broker
Mortgage bankers are often confused with mortgage brokers, but they’re very different. A mortgage broker helps you shop around for a good deal from multiple lenders or bankers, generally at no cost to you as the borrower. Unlike bankers, brokers don’t fund loans — they simply guide you through the process of finding the best loan for your situation.
“A banker uses their own money for funding while a broker only facilitates between a borrower and a lender,” explains Paul Sundin, CPA, CEO and tax strategist at Emparion, based in Chandler, Arizona.
Although the source of funding might not seem too important to you as the borrower, it is useful to know as you navigate the homebuying process. Ultimately, the mortgage banker, not a broker, will be the one to make the decision about your loan.
Mortgage banker vs. loan officer
The difference between a mortgage banker versus a loan officer might not be as obvious. Although the front end can look similar — meaning you could interact with a loan officer or a mortgage banker when you first look into a loan — not all loan officers are mortgage bankers. That’s because a loan officer typically works for a single financial institution and can only offer products and rates set by that institution. Mortgage bankers, on the other hand, might have more flexibility. Mortgage bankers may be able to get multiple offers from institutions they work with, and they can also originate all types of loans, giving you flexibility in the type of loan you can apply for.
Which type of mortgage professional is right for you?
To find the right mortgage professional for you, compare offers from multiple sources. That can include a mortgage banker, mortgage broker and loan officer.
You may be tempted to choose the first professional you talked to, but that could end up costing you thousands of dollars.
Compare several offers within a span of a few days so you can get an accurate snapshot of current rates. Mortgage rates change frequently, so it’s important to compare offers within a short time frame.
How to find a mortgage lender
Are you looking for a mortgage to buy a home, or want to refinance your loan to a new one? Here are some quick tips on getting the best mortgage and finding the right mortgage lender:
- Boost your credit: A good credit score can help you secure the best loan rate and terms. As you start to consider different lenders, take action to improve your credit, if needed.
- Set your own budget: Although a lender might approve you for a larger loan, it can be wise to only go with what you can reasonably afford. You can use Bankrate’s home affordability calculator to find out where you’d be most comfortable based on your budget.
- Compare rates from multiple lenders: Look for the lender that offers you the best rate and good terms to match. Get loan estimates from multiple lenders so you can compare offers and find the right mortgage for you. You can compare mortgage rates easily through Bankrate.
Mortgage bankers typically originate or initiate home loans and often provide the funding for them. During the home loan process, mortgage bankers will determine whether to approve a borrower for a loan. They’ll also service the loan. Because mortgage bankers typically work for one financial institution and can only offer products and rates set by that institution, it’s important for borrowers to shop around and compare multiple mortgage offers.