The difference between a Mortgage Lender and a Mortgage Broker

Entering into business as a mortgage professional can be a difficult challenge. Regardless of whether you want to work for a mortgage lender or a mortgage broker, you’ll need to obtain a mortgage license by completing the NMLS examination and apply for a license with the state that you plan to work in.

The following facts about mortgage lenders and mortgage brokers may help you decide which type of organization you would rather work for:

The Basics About Mortgage Lenders

A mortgage lender is a financial institution that loans money directly to the consumer. Big, mainstream lenders are normally licensed to originate mortgage loans in all 50 states and are regulated heavily by the federal government.

Consumers apply for mortgages through specific mortgage lenders when they are nearly certain they will be approved for the loan at the rate they desire. People who have strong relationships with their banks often sit down with a mortgage officer in their local branch, apply for the loan, and work out the details from there.

The Basics About Mortgage Brokers

A mortgage broker acts as an intermediary between the mortgage lender and the consumer. When a consumer approaches a broker to apply for a mortgage, the broker will then find a lender within their network that best fits that client’s particular credit and income profile, and will also try to accommodate any other requests made for the loan itself.

Consumers who approach a broker may or may not have a tier 1 credit profile. Applicants with poor credit often use a broker because they are unsure about which banks will lend to them, and assume a broker will be able to find a bank to help them out. Applicants with an excellent credit profile will use a broker to help them find the best rates possible.

Brokers often work within a strict set of guidelines created by the banks they work with. While there are certain fees and closing costs associated with using a direct lender, a mortgage broker might add on an additional amount to compensate for finding someone to underwrite the loan.

Obtaining a Mortgage License: Needed for Both Lenders and Brokers

Nearly every state requires that brokers, loan officers, and financial institutions have a mortgage license.

When obtaining a license to work for an employer, you should start first by obtaining a checklist with necessary items that will help satisfy your state’s regulatory requirements. If your prospective employer is also registered in the NMLS system, they can help pay any fees associated with the process by filling out an application for you.