Mortgage bankers originate, underwrite and fund mortgage loans. They also may package and sell the loans to investors, although some keep the loans they originate and service them by accepting borrowers’ monthly mortgage payments and handling taxes, insurance and recordkeeping. Are you thinking of getting a mortgage and considering getting some help with the process? You can find a financial advisor with SmartAsset’s free matching service.
Mortgage Banker Basics
Mortgage bankers and the mortgage banks they work for specialize in real estate finance. They exclusively provide loans and services for borrowers purchasing and refinancing single-family homes, apartments, office buildings, factories, warehouses and land.
The loans mortgage bankers make generally come from their own funds. They may also use lines of credit from warehouse lenders, which are other financial institutions that provide funds for mortgage banks and others to lend.
Mortgage bankers can only offer loans from their own institutions. Most institutions offer a variety of loan types and packages, however. Borrowers working with a mortgage banker will typically have access to a selection of options including conventional, FHA and VA loans.
Mortgage Banker Duties
A borrower’s first exposure to a mortgage banker occurs when the banker receives and evaluates the borrower’s application requesting a loan. The goal of this evaluation is to decide whether the borrower and the borrower’s loan request is a fit with the bank’s lending guidelines. The banker and the organization’s underwriting team review the application and decide whether or not to make the loan. If it’s approved, the money will either come from the bank’s own accounts or from money borrowed from another financial institution.
After closing the loan, the mortgage banker may keep the loan and service it, collecting the borrower’s monthly payments and seeing that the escrow accounts for taxes and insurance are maintained. Other services may include providing payoff quotes.
Sometimes mortgage bankers package the loan with others like it and sell the loans to investors. This provides the mortgage banker with capital to make additional loans. When that happens, another organization will service the loan.
Mortgage Banker Fees
Mortgage bankers are compensated in a variety of ways. Origination fees, typically 1% of the loan value, are a major source. They also charge fees for closing loans, managing escrow accounts and providing additional services such as payoff quotes.
If a mortgage banker keeps the loan, the interest charged on the loan is part of that compensation. If the banker sells the loan, the income from that sale will go to support the organization and fund additional loans.
Mortgage Bankers vs. Loan Officers and Brokers
Mortgage bankers provide a larger set of services than loan officers and mortgage brokers. Loan officers accept loan applications and assist at closings but don’t take as active a role in underwriting as mortgage bankers. Like mortgage bankers, loan officers are employees of banks, credit unions and online lenders and can only offer loans that are part of their employer’s product offering.
Mortgage brokers help borrowers find the best deal among offerings from many different lenders. They will assist borrowers with applications by asking questions about income and debts and credit history. Brokers don’t actually approve applications, underwrite loans or actually lend money, however.
Brokers can connect borrowers with a wider array of loan products because they aren’t limited to one financial institution’s offerings. They will forward applications and supporting documents to lenders and help borrowers answer questions from the underwriters but turn the closing over to a representative from the actual lender.
Checking Out Your Banker
Mortgage bankers are licensed by the states where they do business. Each banker is registered in the Nationwide Multistate License System (NMLS). Before doing business with a mortgage banker, borrowers can look them up using the banker’s name, city, state, ZIP code, NMLS ID or license number. The listing will show the banker’s employer and employment history along with any disciplinary actions.
As part of the borrowing process, solicit quotes from three or more sources, including bankers, loan officers or mortgage brokers. By getting quotes on or about the same day, you’ll be able to directly compare mortgage rates, fees and other characteristics of the loans and make the wisest choice.
Mortgage bankers accept, approve, underwrite and fund loans from borrowers to purchase homes and other real estate. After closing on a loan, the mortgage banker may keep and service the loan, or package and sell it to investors. Mortgage bankers are compensated by fees charged on the loans they originate, as well as interest on the principal from the loans they choose to keep on their books.
Tips on Mortgages
- Before deciding where to look for mortgage financing, consider discussing your overall financial situation with a qualified and experienced financial advisor. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Use SmartAsset’s no-cost mortgage calculator to estimate your monthly mortgage payment with taxes, fees and insurance.
- Use our mortgage comparison tool to compare mortgage rates from top lenders and find the one that best suits your needs.
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