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Can a Bank Be a Mortgage Broker?

When entering into a world of money borrowing for your new home, you will come across people working in different occupations in the lending industry that do similar things, yet so much different. And if you wish to make an informed decision and get the best service, you need to know what each of these occupations actually does.

So can a bank be a mortgage broker? The answer is no. Bank is a type of direct lender that only offers products and services from their institution, while a broker can offer you different deals from different lenders.

Man looking at the contracts

Borrowing money for your new home can be a challenging process if you don’t know how the whole process works and who can provide you with what kind of services. If you want to know the difference between a bank and a broker, keep reading and find out.

What Is the Difference Between a Bank, Lender, and Broker?

Let’s start by explaining what a mortgage lender is. A lender is a bank, financial institution, or loan company that can borrow you money for a certain amount of interest. When applying for a loan, a bank is considered to be only one type of direct lender. A mortgage broker is a person or institution that acts as a middleman between you and many other lenders. So if you don’t want to search for the best lenders on Zillow or search for the best A+ Mortgage reviews by yourself, you can hire a broker or loan officer to do this for you and find you the perfect loan.

Woman signing a contract 

Pros of Working With Bank vs. Broker

No matter if you are looking for a fixed or adjustable-rate or 30 years loan or to refinance your home, both the bank and broker can help you with that. However, there are some advantages and disadvantages of hiring one or the other.

What Are the Pros of Working With a Mortgage Broker? It Can Help You With Disclosure   

The biggest advantage of working with this kind of professional is that you will have plenty of options. Also, professionals can help you with the whole approval process and paperwork regarding a closing disclosure. It can also help you with advice, for example, whether you should lock the rates or not. Or if you have any questions about mortgage points or maybe how to get a mortgage deed. This can be a huge game-changer for your final loan cost.

Pros of Working With a Bank?

However, working with brokers is not for everyone, and some people prefer to get their loans directly from the source. And this is the biggest advantage of working with a direct lender – a personal connection with the loan officer.  For example, if you want to get a HELOC mortgage or to get a loan on the land, the best is to go directly to a bank. You can even negotiate with the institution to give you some discounts. And last but not least, you will pay fewer fees if you go directly to the lender and do not hire a middleman to do this for you. 

Bank vs Broker – Biggest Cons

Like there are advantages of working with a broker, there are also a lot of disadvantages. One of the biggest ones is that when you hire one, you need to understand that you are hiring an individual that may not be so good at their job. The other disadvantage is that the broker you hire may not have access to all lenders and loan programs. And if you wonder how brokers make money, the answer is from you. You will have to pay for this service. Usually, the lender pays the broker’s fee, but sometimes, this is left for the borrower to pay. And last but not least – a broker can be in conflict of interest and convince you to take a loan that is not in your favor so he could make a profit.

When it comes to the disadvantages of hiring a bank, the biggest one is that you are limited to the programs that the particular lender has, so if you wish to expand your options and search for better rates, you will have to apply for a loan to each lender separately. And this can be a tricky part that can affect your credit score if you don’t do it the right way. You will have to apply for a loan at the same time and finish everything in one month. Also, if you go to a direct lender, you will have to do all the paperwork alone, which can be challenging, and if something is wrong, you can easily be denied and made to start the whole process again. Here are the summarized pros and cons.

BankMortgage broker
ProsDirect connection
Fewer fees
Access to various programs
Help with paperwork
Can get things done faster 
ConsFewer program options
May not get approved
Conflict of interest
Can be incompetent

Can a Bank Be a Mortgage Broker?

As you can see, banks can not be mortgage brokers. Banks only do one thing concerning loans, and that is borrowing money. And even though all financial institutions have their loan officers, these only work for a particular bank and can not offer you any programs that are not from that institution.

On the other hand, brokers are individuals that can help you with finding your new home and the best loan and do all the paperwork for you. And most importantly, they can help you with the discourse of the closing, so you don’t have to worry about getting a harmful deal. Of course, this service will be charged, but in essence, you will get everything done in the arranged time without worrying about deadlines or finding different lenders. But it is crucial that you find a professional that knows what they are doing and talking about. This person doesn’t need to be a high-profile individual – it is important that they offer you plenty of options and deals that are in your favor.