Mortgage brokers and mortgage bankers primary function is to arrange mortgage loans for their clients. They both help their clients complete loan applications and they obtain documentation that they believe an underwriter will need to approve their loan. An appraisal is ordered and then the information is given to a loan processor that obtains independent verification of the information provided. They also request a preliminary title report to determine who owns the property and who the current lender is.
A loan officer works with the borrower to determine what type of loan they want and what loans they believe will be approved. Once that is determined, the loan officer gives the file to his processing department so that the file can be prepared for underwriting. When the title report, appraisal and various verifications are received, the processor puts the information together in a specific order and forwards the documentation to the underwriter.
A mortgage banker uses his money, or his line of credit to fund loans once the underwriter approves the loan. The mortgage banker then sells the loan to a direct lender and uses the proceeds to fund another loan. The mortgage banker often sells the loan at a premium price. Their income is derived from the loan origination fee and several other fees that they charge in addition to the premium that is based on the interest rate that the borrower pays.
The mortgage broker processes the loan package and forwards the completed package to a mortgage banker or a direct lender. The lender funds the loan and pays the broker the loan origination and processing fees. Brokers have relationships with several lenders so they can send the completed loan package to the lender that has the best interest rate and program.
Mortgage brokers and mortgage bankers each have advantages and disadvantages. Brokers have more loan programs available and they know different lenders guidelines. They can submit the loan to the lender that is most likely to approve their client's loan application.
Mortgage bankers typically charge a lower origination fee and other fees. Since processing and underwriting are in the same office, any underwriting questions can be answered quickly and the loan approval process is typically faster.