As you begin the process of buying a home, you may wonder about the difference between mortgage brokers and mortgage lenders.

A mortgage broker serves as an intermediary who seeks several potential lending institutions for your home loan, while a lender works at a mortgage company, which directly issues home mortgage loans and lends you the money to finance a home purchase.

What is the role of a mortgage broker?

A licensed mortgage broker finds a potential lender to help you secure a home loan. A mortgage broker works independently with a variety of mortgage banks, and ideally, matches you with the right home mortgage loan to best meet your financial needs. Some homebuyers choose to use mortgage brokers to navigate potential difficulties they might encounter when shopping for a home loan, such as poor credit.

A mortgage broker works with you throughout the home-buying process. A broker receives payment either from you, as a borrower fee, or as a commission from the mortgage lender. Typically, mortgage broker fees or commissions range from 0.5% to 2.75% of the loan amount, and mortgage brokers receive payment upon closing.

If you’re considering a mortgage broker, it’s advisable to do your research before committing to their services. Ask questions so you know the various mortgage bank and loan options available to you, as well as who’s responsible for paying broker fees.

What is a mortgage lender?

A mortgage lender represents the financial institution that approves your home loan and lends you the money to purchase a home. Lenders review your financial information, such as debt-to-income ratio, credit score and financial assets, before deciding if you qualify for a home loan. The mortgage bank sets interest rates and provides your loan terms, which vary based on the type of home mortgage you’re seeking.

Whether you decide to work with a mortgage broker or directly with a mortgage bank or mortgage company, you want to make sure you’re getting the best loan terms and interest rates. As you begin the home-buying process, it’s important to examine all your mortgage options and work with someone you trust.

Get pre-approved for a mortgage at First Merchants Bank today! Pre-approval can give you leverage in the homebuying process and confidence to know exactly what you can afford to borrow.