Where to Get a Mortgage
Before 1980, there were three primary resources of home loans: commercial banks, thrifts (also known as savings and loans), and certain major credit unions. Today, there are other choices, including mortgage bankers and mortgage brokers.
Mortgage bankers are financial institutions that are chartered as banks. They can be big enough to originate and fund loans for individual customers and go directly to Freddie, Fannie, and Ginnie, who resell them and funnel money back to servicers, who start the process all over again. They may also package up loans for direct sale to other financial companies with big dollars to invest. There are certainly smaller mortgage bankers as well, but due to their size, they play mainly as intermediaries in the process.
Brokers are not lenders. They are middlemen, and they charge a fee for their services in addition to what you'll be paying in fees to the actual lender. Make sure the cheaper solution in terms of interest rate isn't going to cost you more.
Mortgage brokers have a job that's similar to that of any other broker. Real estate brokers help you buy or sell a house. A stockbroker helps you buy or sell investments for your retirement plan. A mortgage broker has access to a particular universe of wholesale lenders (including mortgage bankers, insurance and finance companies, and others). Based on what those lenders are offering on a particular day, a mortgage broker's job is to get you the best deal based on your credit history and borrowing needs. Mortgage brokers are matchmakers, and in many cases they can get you a better deal than if you went down to the local mega-bank.
