Broker vs. Banker

I've taught about half a dozen "First-Time Homebuyer" classes over the last year and a common question I've been asked is, "Is there a difference between getting a home loan through my bank or through a mortgage broker?" Short answer: "Yes" with a "but". Long answer: "No" with a "maybe". Just kidding. There are a couple fundamental differences between the two.

1. Brokerage: Also known as wholesale lending because they can offer rates below retail prices (and higher than retail prices), the mortgage broker works as an independent contractor for various banks and lenders. Most mortgage brokers will have a greater variety of home loan products to choose from than a bank. A home loan originated by a mortgage broker will always be sold to another lender.
2. Bank: The loan officer that works for a bank will only offer home loan products from that bank. Generally speaking a bank will service the majority of the loans that it originates.

I really don't think that these differences should determine whether someone uses a loan officer or not. It should not matter if they work for a bank or a broker. The fact is that there are good and bad loan officers that work at both banks and brokerages. The trick is finding a good loan officer regardless of where they work. Jack Guttentag, the "Mortgage Professor", describes some characteristics of good mortgage brokers that everyone should look for when shopping for a home loan. See What Makes a Good Mortgage Broker, part 1