When buying a home, home buyers have three main options for where to get a mortgage:

1. A mortgage broker
2. A mortgage lender
3. A traditional bank

Choosing the right lender can save you time, money, and help you get approved for your mortgage more easily. This article explains the differences between mortgage brokers, lenders, and traditional banks, and highlights the benefits of each option so you can make an informed decision.

What Is a Mortgage Broker?

A mortgage broker is a person or company that works on your behalf to find a mortgage. They don't lend you the money themselves; instead, they search multiple lenders to find a mortgage that suits your needs.

Mortgage brokers typically have access to a wide variety of lenders, which makes them a good option for home buyers who may have unique financial circumstances. This can include self-employed individuals, people with credit challenges, or those looking for non-traditional loan products.

Brokers don't issue final loan approvals, but they can help gather your application materials, assist with pre-approvals, and guide you through the process. In exchange, they collect a fee, which can be paid by you, the lender, or both.

For instance, if your loan exceeds conforming loan limits, a mortgage broker may help you find more favorable rates and terms that suit your situation.

What Is a Mortgage Lender?

A mortgage lender is a person or company that can directly approve and fund your mortgage loan. They manage every step of the process, from your application to closing, and provide the funds for your mortgage.

The most common type of mortgage lender is a correspondent lender, often referred to as a mortgage bank or non-bank lender. These lenders approve loans in-house and can close loans more quickly and efficiently than other types of lenders.

Non-bank lenders now make up 68.1% of all mortgages, as they often offer competitive rates and a faster loan approval process compared to traditional banks.

Direct-to-consumer lenders fall under this category. They provide a more streamlined process for standard loans, which can lead to cost savings and faster closings for most buyers.

What Is a Traditional Bank?

Traditional banks are large, brick-and-mortar institutions that offer a variety of financial products, including mortgages. These banks tend to have stricter lending criteria and offer fewer mortgage options than brokers or non-bank lenders.

While traditional banks are often slower in approving loans, they can be a good choice for buyers who want to work with a familiar institution and prefer in-person service at local branches.

Mortgage Broker vs Lender vs Bank: Key Differences

The main differences between a mortgage broker, lender, and traditional bank can be broken down into three categories:

1. The variety of loan products they offer
2. How the loan is approved
3. Where the funds come from

Mortgage brokers are great for buyers with specific or unique needs. They don't approve or fund loans themselves, but they can help you find the right lender. Mortgage lenders, including correspondent lenders, approve and fund loans directly and often provide faster service at lower costs for standard loans like a 30-year fixed-rate mortgage. Traditional banks also approve and fund loans, but their processes can be slower, and their rates may not be as competitive.

How to Find a Mortgage Broker

If you're looking for a mortgage broker, asking friends or colleagues for recommendations is a great place to start, especially if your financial situation is non-typical. Brokers are state-licensed and often specialize in specific types of loans, such as those for non-warrantable condos or new construction homes.

It's important to speak with more than one broker. Doing so will help you compare loan offers and give you a better chance at finding the best deal.

How to Find a Mortgage Lender

For first-time home buyers, finding a mortgage lender is often as easy as searching online. Many lenders now provide real-time rates and online pre-approvals, making it easy to shop around.

Correspondent lenders are a popular option for standard loans like 30-year fixed-rate mortgages and low down payment loans. However, if your situation is unique, a mortgage broker may still be a better fit for your needs.

Should You Work with a Mortgage Lender or Broker?

Deciding whether to work with a mortgage lender or broker depends on your personal situation. If your finances are straightforward—such as having W-2 salaried income, good credit, and a solid down payment—a mortgage lender is likely to offer lower rates and a faster process.

Work with a mortgage lender if you are:

• First-time home buyers
• W-2 salaried income
• Good credit history
• Buying a single-family home
• Down payment of 3% or more

On the other hand, if you're newly self-employed, buying a condo in a new development, or have other unique needs, working with a broker may give you more loan options and flexibility.

In general, simpler loans are handled more efficiently by mortgage lenders, while unique or complex loans may require a broker's expertise.