Mortgage bankers: Who they are and what they do in home lending

There are many roles involved in the lending process, and you might work with different people from the time you get preapproved for a mortgage to closing. As a result, understanding who does what and when can make your life easier. Here, we explore what a mortgage banker does in the process of getting a home loan while differentiating their role from other mortgage pros (namely, mortgage brokers).

What is a mortgage banker?

A mortgage banker is a person or entity that originates, or initiates, home loans, and typically provides the funding for them. The home loan banker could be an individual or a large company, but in either case, they function in the same capacity. To give you a relatively simple mortgage banker definition, this is the entity that approves you for a loan and cuts a check to the home seller so you can get your keys to the house.

Many mortgage bankers generate revenue by charging borrowers an origination fee.

Once a mortgage banker originates a loan, the banker can keep the loan in its portfolio and service it. Alternatively, they can sell it on the secondary market, sell the servicing rights to another party or a combination of the two.

What does a mortgage banker do?

A mortgage banker determines whether to approve a borrower for a loan, which is usually accomplished through the banker’s underwriting department. A mortgage banker’s services might include:

• Originating loans: Mortgage bankers have a variety of loans to offer, but some can specialize in particular types of loans, such as jumbo loans, VA loans or unusual financing options.
• Servicing loans: Once the loan closes, your mortgage banker might also service your loan, meaning they manage the repayment process and assist you if you need help with repayment.
• Selling loans: Mortgage bankers can also sell your mortgage or the rights to service your mortgage on the secondary market. Mortgage bankers do this to free up more capital to make more loans to more borrowers.

You may have to work with other financial officers to receive financing for your home. For example, you might also work with a mortgage broker or a loan officer, both of which have certain distinctions from a mortgage banker.

Mortgage banker vs. mortgage broker

Mortgage bankers are often confused with mortgage brokers, but they’re very different. A mortgage banker is tied to one financial institution, while a mortgage broker works independently of lenders. As a result, mortgage brokers can help you compare options from various lending institutions.

The broker helps you shop around for a good deal from multiple lenders or bankers, generally at no cost to you as the borrower. But their role maxes out at a certain point. Unlike bankers, brokers don’t fund loans — they simply guide you through the process of finding the best loan for your situation.

“A banker uses their own money for funding while a broker only facilitates between a borrower and a lender,” says Paul Sundin, CPA, CEO at Emparion, based in Chandler, Arizona.

Although the funding source might not seem too important to you as the borrower, it is useful to know as you navigate the homebuying process. Ultimately, the mortgage banker, not a broker, will be the one to make the decision about your loan. In fact, some people who get a mortgage never work with a broker at all, instead working straight with the mortgage banker from the get-go.

Mortgage banker vs. loan officer

The difference between a mortgage banker versus a loan officer might not be as obvious. All mortgage bankers are loan officers, but not all loan officers are mortgage bankers. A loan officer typically works for a single financial institution and can only offer products and interest rates set by that institution.

Mortgage bankers, on the other hand, might have more flexibility. Mortgage bankers may be able to get multiple offers from institutions they work with, and they can also originate all types of loans, giving you flexibility in the type of loan you can apply for.

How to find a mortgage banker

Are you looking for a mortgage to buy a home, or do you want to refinance your loan? Here are some quick tips on getting the best mortgage and finding the right mortgage lender:

1. Boost your credit: A good credit score can help you secure the best loan rate and terms from mortgage bankers. As you start to consider different lenders, take action to improve your credit, if needed.
2. Set your own budget: Although a bank might approve you for a larger loan, it can be wise to only go with what you can reasonably afford. You can use Bankrate’s home affordability calculator to find out where you’d be most comfortable based on your budget.

Compare rates from multiple lenders: Look for the lender that offers you the best rate and good terms to match. Get loan estimates from multiple lenders—including banks—so you can compare offers and find the right mortgage for you. Mortgage rates fluctuate frequently, so it’s important to compare offers within a short time frame to get an accurate snapshot of the current rates. While a mortgage banker at each institution can help, you can also compare mortgage rates easily through Bankrate.