Is it better to use a mortgage broker or a mortgage lender?

A mortgage lender is a financial institution that makes direct loans, while a mortgage broker does not lend money; the broker finds different lenders or mortgage loans for a fee. When you work with a broker, you pay a loan-specific fee for that service. Some financial institutions operate as both lenders and brokers, so ask whether a broker is involved in your transaction, and shop around for the best loan terms either way.

A mortgage broker is a company that conducts loan origination activities through one or more licensed loan originators, while a mortgage lender is a company that makes mortgage loans, meaning it closes loans in its own name and advances funds, or sells loans to noninstitutional investors for compensation or gain. A lender must document a net worth of at least $63,000, or $250,000 with a servicing endorsement, in an audited financial report; a broker has no net worth requirement. A lender that services loans for more than 4 months also needs a Mortgage Lender Servicer license.

Neither is automatically better; the two differ in structure and product range. A mortgage broker works with multiple lenders, including banks, credit unions, and mortgage lenders, and can compare options across them, while a loan officer works for one financial institution and offers only that employer's products. A broker may also negotiate with lenders to waive application, appraisal, or origination fees, and typically charges an origination fee of 1%-2% of the loan amount, paid by the borrower, the lender, or both.