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Dan Green
Since 2003, Dan Green has been a leading mortgage lender and respected industry authority. His unwavering commitment to first-time home buyers and home buyer education has established him as a trusted voice among his colleagues, his peers, and the media. Dan founded Homebuyer.com to expand the American Dream of Homeownership to all who want it. Read more about Dan Green.
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Homebuyer.com is your trusted guide to homeownership. Since 2003, our team has offered real-world expertise and advice to tens of millions of U.S. home buyers. Our content stands on its integrity: it's factual, unbiased, and free from outside influences. Read more about our governing editorial guidelines.
We also exist for profit and want our readers to understand how we make money.
Homebuyer.com is a mortgage-company-affiliated publisher. We earn compensation when you click specific links on the website, or apply for a mortgage with Homebuyer.com or partner listed in our comparison tables. Our partners compensate us differently, so we randomize our tables to protect our readers from steering. We may also earn compensation for advertisements on the site, which are indicated clearly. Note that limitations in our software, whether we originate mortgages in your area, and credit factors may affect the offers and comparison tables you see on various parts of this site. We do not include offers for every mortgage product available. Someday, we hope we will.
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Your trust matters to us. This article was thoroughly checked for accuracy as of November 6, 2023. Homebuyer.com ensures every piece of information we share reflects the latest in mortgage standards. Learn more about our commitments to our reader in our editorial guidelines.
When you buy a home, you have three options for where to get a mortgage:
Choosing the appropriate lender type will save you time and money on your mortgage and help you afford more home.
You’re also more likely to get your mortgage approved.
This article outlines the differences between a mortgage broker vs lender vs traditional bank. It explains the advantages of each lender type and how you know which type is best for your home-buying needs.
A mortgage broker is a person or company that shops for mortgages on your behalf, searching hundreds of companies for a fair combination of mortgage rates and fees.
Mortgage brokers don’t lend their own money. Brokers arrange for other mortgage lenders to lend you money. In exchange for this service, mortgage brokers collect a fee from the buyers, the mortgage lender, or both.
Mortgage brokers are agents. They collect mortgage applications and locate suitable sources of money. A broker may pre-approve your mortgage, but it cannot issue a final mortgage approval without the help of the lender.
Because brokers are intermediaries with thousands of lender relationships, their competitive advantage is in atypical, niche mortgage situations. Brokers do not have a natural advantage for conventional and FHA lending, although they may provide a lower price.
Home buyers who are self-employed or whose mortgages exceed conforming loan limits often find their best mortgage rates and terms with a mortgage broker.
A mortgage lender is a person or company with the authority to approve and fund your mortgage loan. Mortgage lenders handle all of the functions associated with starting a mortgage and getting money to your closing.
The most common type of mortgage lender is the correspondent lender. Correspondent lenders often refer to themselves as mortgage bankers.
Correspondent lenders are sometimes called mortgage banks or non-bank lenders. Their defining characteristic is a centralized office where loans are approved, and sales offices are distributed around the country. Correspondent lenders account for 68.1% of all mortgages.
Direct-to-consumer mortgage companies, including Homebuyer.com, are also grouped as correspondent lenders.
Because correspondent lenders approve and fund mortgage loans in-house, loans can close faster and with fewer mistakes than other lenders. Interest rates are often lower, too, because correspondents can operate at scale.
Correspondent lenders match well with home buyers who meet the following criteria:
The majority of first-time home buyers use financing best suited to correspondent lending.
A traditional bank is a brick-and-mortar bank that sells mortgages and other financial products, including checking accounts, savings accounts, and credit cards. Traditional banks are sometimes known as Big Banks or traditional lenders.
Traditional banks may operate call centers through their websites or take mortgage applications in a local branch via a loan officer. Home buyer loans are reviewed, approved, and funded from a central processing location.
Traditional banks offer a narrow range of mortgage products, and interest rates are typically above industry averages. Traditional banks are a good choice for home buyers who prefer to work with a familiar bank name and who don’t mind slower processing times.
The difference between a broker, a lender, and a bank can be summarized into three areas:
For unique mortgage loans, including no income verification loans and loans for unique properties, mortgage brokers are usually best because a mortgage broker can locate an off-the-wall or atypical mortgage loan for buyers that need it.
Brokers can locate unique loans but do not approve or fund mortgages.
For standard mortgage loans, such as a 30-year fixed-rate mortgage loan or a 15-year fixed-rate mortgage loan, correspondent lenders are usually the optimal combination of rates, fees, and speed. The majority of home buyers choose correspondent lenders.
Lenders specialize in standard mortgage loans and approve and fund mortgages.
Traditional banks work well for standard mortgage loans. While they lack speed and price compared to correspondent lenders, they make up for it in size.
Mortgage Broker | Correspondent Lender | Traditional Bank |
Great for unique loans | Great for standard loans | Great for standard loans |
Don’t approve or fund mortgages | Approve and fund mortgages | Approve and fund mortgages |
Standard rates and broker fees | Lower rates and no fees | Standard rates and no fees |
Slower process | Quick process | Slowest process |
A popular way to find a mortgage broker is to ask a friend for a recommendation – especially in non-typical home-buying scenarios. Mortgage brokers are state-licensed, and their geographic focus gives them local expertise. When you’re buying a non-warrantable condo or getting approved for new construction housing, it helps to work with a trusted referral.
Get at least two recommendations.
Mortgage brokers have access to different mixes of mortgages and charge home buyers differently. When you talk to two more brokers, you improve your chances of getting approved and saving money.
For most first-time buyers, the best place to find a mortgage lender is through an online search: enter your search terms and sort through the results. You can get mortgage rates in real-time.
Treat correspondent lenders as your default mortgage company type.
Correspondent lenders typically give better terms than brokers for standard mortgage types such as the 30-year fixed-rate mortgage and low down payment loans. As you get pre-approved, your lender will tell you whether a broker might serve you better.
Correspondent lenders are multi-state companies, but some states may be off-limits. Check before you apply.
There are times when it’s better to work with a mortgage lender and when it’s better to work with a mortgage broker. Here’s how to choose which to do:
Choose a mortgage lender when your mortgage needs are straightforward. If all of the following are true, a mortgage lender may give you a better experience:
However, if your situation is uncommon, such as you’re newly self-employed or you’re buying a condo in a brand-new building, a mortgage broker may be the better choice.
In general, simpler loans fare better with mortgage lenders.
See how much home you can afford to buy. Use our no-risk Immediate Mortgage Approval and find your mortgage eligibility in an instant.
What is a Warrantable Condominium?
When you buy a home, you have three options for where to get a mortgage: Choosing the appropriate lender type will save you time and money on your mortgage and help you afford more home. You’re also more likely to get your mortgage approved. This article outlines the differences between a mortgage broker vs lender […]
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