What Is a Mortgage Banker?
A mortgage banker offers a range of services, such as appraisal, documentation preparation, underwriting, and mortgage origination, to aid in the acquisition of a home. Once you’ve submitted your loan application, they lay the foundation for moving forward with a mortgage.
Find out more about mortgage bankers, their processes, and what sets them apart from mortgage brokers.
Definition and Examples of Mortgage Bankers
A mortgage banker is a person, organization, or business that aids homebuyers in obtaining a mortgage and closing on a property. They are a class of loan officer that focuses on mortgages and has the ability to work in sales.
Mortgage bankers who work for a financial institution must safeguard the interests of the bank, which requires them to assess the eligibility of mortgage applications and the risks of accepting them. After a borrower and a suitable mortgage have been matched, the mortgage banker guides applicants through the funding procedure.
- Alternate names: loan officer, mortgage originator
How Mortgage Bankers Work
Let’s imagine that you are considering buying a home for the first time. You finally find a home that meets all of your criteria after months of looking, and you decide to submit an offer. When the seller accepts, you both sign a sales agreement, which is a binding legal deal.
Perhaps if you were probably already prequalified or even preapproved for a loan, now is the time for you to gather all of your paperwork and start the laborious process of establishing a mortgage loan. Pay stubs, copies of your bank statements, and other financial records are required.
Your mortgage banker will serve as your primary point of contact during this time. They will communicate with your lender to review your finances and decide whether or not to move forward with your loan.
After you’ve turned in all the required documentation, let’s say your mortgage banker calls to inform you that the bank won’t provide you a loan because your debt-to-income ratio is too high. Your banker may be able to assist you in this situation by explaining your choices, such as using cash saved to pay off a car loan and bringing your DTI down to a manageable level. Your mortgage banker may advise financial counseling as a strategy to secure a better mortgage if they are affiliated with a financial institution that provides it.
Mortgage bankers are also capable of acting independently of a financial institution, in which case they would be the ones to finance your home. When your loan has closed, they have two options for servicing it then on or selling it to a different company.
Mortgage Bankers vs. Mortgage Brokers
|Mortgage Bankers||Mortgage Brokers|
|Close loans using either their own funds or funds of the institution for which they work||Does not use their own funds; can use a variety of mortgage lenders or banks|
|Can be paid commissions||Paid in commissions from lenders or fees from borrowers|
The key distinction between mortgage bankers and brokers is how intimately involved they are with your loan. They use the institution’s money to conclude your loan while they work as loan officers inside a financial institution. When acting independently, they are utilizing their own money—or money from other sources to which they have access—to enable the closing of your loan.
In contrast, mortgage brokers serve as a go-between for you and a mortgage lender or bank. They might assist in putting you in touch with a network of capital to pay for your mortgage, but they aren’t linked to that cash in any way.
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