Lender vs Broker

I’m sometimes referred to as a mortgage broker, when in reality I work for a mortgage lender.  Actually, to be more precise, First Heritage is a correspondent lender.  What’s the difference?  Is one better than the other?

In a nutshell, a mortgage lender (also called a mortgage banker) makes a loan directly to the borrower with their own funds.  On the other hand, a mortgage broker does not actually lend money but rather finds a lender to make a loan on behalf of their client, the borrower.

As with most things in life, there are pros and cons to both.  A mortgage lender controls every phase of the loan, from origination, through processing, underwriting and closing, which is a good thing.  That way, a loan officer has immediate access to your loan file and can confer directly with the underwriter who approves the loan.

 A mortgage broker, on the other hand, takes the application and finds the right loan product and interest rate for the client, but really acts as more of a “middleman” through the process, and can sometimes have difficulty in getting in contact with the processor and/or underwriter.  This may seem to be an insignificant point early on, but many borrowers (and agents) have experienced the frustration of not being able to get clear answers in a timely fashion, especially for a home loan on a purchase that’s scheduled to close in just a few days.

Brokers, however, like to tout that they have the ability to shop for the best deal, which is true.  Unlike most lenders, they usually have a breadth of various sources they can place a loan with, much like an independent insurance agent who shops for the best and lowest priced coverage.  By contrast, a mortgage banker can’t shop around, but must use the interest rates and fees set by their company. 

So it might seem the best of both worlds would lie somewhere in the middle, which is precisely what I offer my clients.  As a correspondent lender, First Heritage Mortgage controls every aspect of the loan process and closes loans with our own money.  But because we underwrite to several investors’ guidelines, I can compare the rates each day from those many different investors to offer my clients the lowest of what is available.