Your mortgage lender is the financial institution that lent you the money. Your mortgage servicer is the company that sends you your mortgage statements. A lender is a financial institution that lends directly to you. A broker doesn't lend money.
A broker can work with many lenders. While they can provide services to people seeking home loans, they are very different. A mortgage broker acts as an intermediary by helping consumers identify the best lender for their situation, while a direct lender is a bank or other financial institution that decides if you qualify for the loan and, if so, delivers the check. A mortgage broker helps a borrower compare prices with several lenders.
The goal is to get the best loan offer. Brokers develop relationships with many lenders. This may include some lenders that don't work directly with borrowers. A mortgage lender is a financial institution that provides mortgage loans, while a mortgage servicer is a financial institution that manages mortgage loans while borrowers pay them off.
Many financial institutions act as mortgage servicers and mortgage lenders. However, it's also common for a homeowner to obtain a mortgage from a lender and then transfer it to a different servicing entity. Choosing to apply for a mortgage with the help of a mortgage lender or mortgage broker is a crucial step in the homebuying process, and it's important to understand the differences between a lender and a broker when making the decision. The key difference between a mortgage broker and a lender is the work they do.
A lender lends you money, while a broker helps you find and work with a lender. Because of the scope of a bank's financial activities, most banks manage their mortgage loans. Therefore, once your loan is closed, you will continue to make monthly payments to the same bank that originated the loan. Many see this as an advantage compared to using a full-service bank.
This way, they have access to structured lending programs offered by a variety of loan servicers, usually large domestic banks. Unlike a “mortgage broker”, the mortgage company still closes and funds the loan directly. Because these companies only offer mortgage loans, they can streamline your process much better than a bank. This is a big advantage, meaning that your loan can be closed faster.
You should keep in mind that your mortgage lender may sell your loan to another institution after closing. If this happens to you, don't worry. The loan documents you signed with your original lender are legally binding for the life of the loan. The loan servicer cannot change the interest rate, fees, or any other aspect of the loan.
Mortgage brokers once had a risky reputation, so it's no surprise that many people are still hesitant to use them. If you're looking for someone to accompany you through the mortgage process every step of the mortgage process, check out Churchill Mortgage and talk to a home loan specialist. Unlike mortgage lenders, brokers don't lend you money; they'll connect you with lenders and help you by analyzing your credit history, verifying your income and work history, and using that information to apply for home loans on your behalf. While a mortgage broker is a one-stop-shop for multiple options, their fees come from the lender, so well-qualified buyers can get better rates and fees by eliminating the middleman.
People who are less qualified buyers or who buy less traditional properties will find it easier to find loans for which they can be approved by using a mortgage broker than through individual direct lenders with generally stricter approval criteria. Investopedia's best overall option for direct mortgage lenders is Quicken Loans, better known as Rocket Mortgage. If you prefer not to receive dozens of calls from brokers, you can search for them directly through sites that bring together local and independent mortgage brokers from all over the country. Understanding the difference between mortgage lenders and servicers can help clarify any confusion you're experiencing if you're notified that you'll need to start sending your mortgage payments to another company.
Mortgage loan originators go through very different processes between federally authorized banks and mortgage companies. When a prospective homeowner is ready to seek a mortgage, they may decide to consult with a mortgage broker. When you send your monthly payment to your mortgage servicer, it sends your principal and interest to the mortgage holder. Mortgage brokers work with several different lenders and banks to offer you a loan that fits your needs.
For people who don't want the hassle of contacting different banks, mortgage brokers are a better option. A good mortgage broker should be able to provide valuable information, such as which lenders lend money in certain areas, which offer a specific type of mortgage, and which ones accept or avoid loan applications for certain types of homes, such as cooperatives, condominiums or multi-family homes. They do everything from processing your loan application to giving you a pre-approval of the mortgage and underwriting your mortgage. Just like finding a lender, it's helpful to do your research when looking for the right mortgage broker for your personal and financial situation.