What Is a Mortgage Banker?

A mortgage banker explains loan documents to a client.
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DEFINITION
A mortgage banker is a professional who helps facilitate the purchase of a home by providing a variety of services, including valuation, preparing documentation, underwriting, and originating a mortgage. They provide the groundwork to move forward with a mortgage once you’ve completed your loan application.

A mortgage banker helps facilitate the purchase of a home by providing a variety of services, including valuation, preparing documentation, underwriting, and originating a mortgage. They provide the groundwork to move forward with a mortgage once you’ve completed your loan application.

Learn more about mortgage bankers, how they work, and how they’re different from mortgage brokers.

Definition and Examples of Mortgage Bankers

A mortgage banker can be a person, an institution, or a company that helps homebuyers secure a mortgage and close on a home. They are a type of loan officer who specializes in mortgages and can act in a sales capacity.

Mortgage bankers who work for a financial institution must protect their bank’s interests, which means they’ll be screening mortgage applications for suitability and analyzing the risks of approving these applicants. Once a borrower has been matched with a suitable mortgage, the mortgage banker leads applicants through the funding process.

  • Alternate names: loan officer, mortgage originator

How Mortgage Bankers Work

Let’s say you’re looking to purchase a home for the first time. After months of searching, you’ve found a property that ticks all the boxes, and you’ve chosen to put in an offer. The seller agrees, and the two of you sign a sales agreement, which is a legally binding contract.

Although you have likely already been prequalified for a loan, or even preapproved, now is the time for you to get all your documentation together and begin the intensive process of initiating a mortgage loan. You’ll need to provide pay stubs, copies of your bank statements, and other financial documentation.

Your point of contact during this time will be your mortgage banker. They’ll be the ones liaising with your lender to analyze your finances and decide whether or not to move forward with your loan.

Suppose you’ve delivered all your paperwork and your mortgage banker comes back to you with some bad news: The bank isn’t willing to extend a loan to you because your debt-to-income ratio is too high. In this case, your banker might help you understand your options, such as using cash savings to pay off a car loan and reduce your DTI to an acceptable level. If your mortgage banker works with a financial institution that offers financial counseling, they might suggest that service as a way to get a better mortgage.

It’s important to note that mortgage bankers can act in a sales capacity, too. That means they could receive a commission on every successful mortgage they originate.

Mortgage bankers can also act independently from a financial institution, in which case, they provide the financing for your property themselves. Once your loan has closed, they can either choose to service it from then on, or sell it to a different company.

Mortgage Bankers vs. Mortgage Brokers

Mortgage Bankers Mortgage Brokers
Close loans using either their own funds or funds of the institution for which they work Does not use their own funds; can use a variety of mortgage lenders or banks
Can be paid commissions Paid in commissions from lenders or fees from borrowers

The main difference between mortgage bankers and brokers is that mortgage bankers are closely connected to your loan. When they’re operating as loan officers inside a financial institution, they are using the institution’s funds to close your loan. When operating independently, they are using their funds—or other funds to which they have access—so that your loan can close.

Mortgage brokers, meanwhile, act as a middleman between you and a mortgage lender or bank. They may help connect you with a network of capital to finance your mortgage, but they aren’t directly tied to that capital.

Key Takeaways

  • Mortgage bankers help facilitate your home purchase by acting as advisors and providing analysis on your application.
  • A mortgage banker can be a person, a financial institution, or a company.
  • Mortgage bankers who work independently can service the loan themselves or sell the loan once you’ve closed on your property.
  • Mortgage bankers fund the mortgage themselves, as opposed to mortgage brokers who simply find you a lender.

Article Sources

  1. Freddie Mac. "Your Step-by-Step Mortgage Guide." Page 7. Accessed Jan. 22, 2022.