A mortgage lender offers only home loans, while a bank offers a variety of financial products. Mortgage lenders tend to be less conservative, but banks can save you time and money if you are a qualified buyer.

When you get to the point in the home buying process where it is time to pick a lender, it is important to shop around. It can feel overwhelming, but getting multiple quotes from different types of lenders can save you big in the long run.

Different types of lenders will offer various rates, loan products, and speed in processing your loan. Generally, you get quotes from one bank and one mortgage lender, at minimum, to see the differences in what they can offer.

Before you choose a lender, it helps to know what loan type you are interested in, how qualified a buyer you are, and which type of lenders are most likely to give you what you need. That’s why

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The difference between mortgage lenders and banks

Both mortgage lenders and banks are direct lenders. This means that they are providing the money for the loan themselves, as opposed to a mortgage broker, who acts as an intermediary and works with several direct lenders.

There are significant differences between a mortgage lender and a bank, and these differences can impact your odds of getting a loan, how long your loan takes to process, and what it will cost you.

The main differences in mortgage lenders and banks concern the variety of products they offer and the governing bodies that regulate them.

Here is a quick review of lender types:

Lender Type	Pros	Cons
Direct Lender (Bank)	Streamlined process Can combine all your financial products in one place Lower fees than with a broker	Fewer loan options Less flexible due to federal regulation
Direct Lender (Mortgage Company)	Streamlined process More flexible lending options	May sell your loan later
Mortgage Broker	Shows options from multiple lenders Finds solutions for less qualified buyers	Longer time to close on your loan Extra cost for their service

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* checking your rate won’t affect your credit score

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* checking your rate won’t affect your credit score

How direct lenders (mortgage lenders and banks) work

Direct lenders offer a faster process than mortgage brokers because they are financially backing your loan themselves. These companies use loan officers to work with you and find the best options available through that specific lender.

When you work with a direct lender, they will only be discussing your options through the company they work for. Because of that, they have a vested interest in finding a product that works for you so that you don’t choose another lender.

The problem is that there will not be an option to comparison shop if you only work with one direct lender—so make sure you do a little investigating on your own. You can lose out on other products or better offers if you accept the first loan offer you receive.

Mortgage lender

A mortgage lender (like Rocket Mortgage or Better) only offers home-related loan products. This can include home loans, refinancing loans, and equity loans. Because mortgage lenders have a limited number of loan products, you can be sure that the loan officer you work with will be an expert on home lending.

Mortgage lenders are regulated by individual states and have more flexibility in the products that they offer. This means that borrowers with specific needs may have better luck with a mortgage lender than a bank.

Pros and cons of mortgage lenders

Pros:

Mortgage lenders may be more flexible if you are a less qualified buyer

Streamlined processes to close more quickly

Access to a wider range of options

Cons:

Your lender may sell your loan to another organization. This will not change the terms of your loan, but it will change the servicer.

MORE: 10 best companies for home and car insurance

Banks

Banks, on the other hand, are federally regulated and offer a variety of financial services, like checking accounts, credit cards, and other types of loans. This means that with a bank, you may have the option of dealing with one place for all your financial needs.

A bank’s loan officer may not be a mortgage specialist, but more of a loan generalist. Still, they may help you think about how you can combine other bank products to have an easier time navigating your loan portfolio.

Because they are regulated federally, banks tend to be more conservative in their lending practices. But for well-qualified buyers, getting your mortgage through a bank is often the fastest and most cost-effective option.

Pros and cons of banks

Pros:

Banks may offer discounts or special incentives to current customers

Your loan will stay with the same bank for its lifetime

May have lower fees than other options

Ease of established relationships

Cons:

If you are less qualified or have specialized loan needs, a bank may not be able to lend to you

Because of federal regulation, cost and qualification requirements are not flexible

How mortgage brokers work

Another option for home buyers is to work with a mortgage broker. A mortgage broker works with several different lenders to find you the best deal (kind of like

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does with car insurance!).

A mortgage broker will work with you to find the best direct lender for your particular situation—whether that be a mortgage company, a major bank, small lender, insurance and trust company, or private funder.

Because a mortgage broker does not work for a direct lender, they can present you with a wider range of options. However, that also means they don’t have much control over how quickly (or not) your loan is processed. If you are in a hurry to close on a house, a mortgage broker may not be the fastest solution.

Key Takeaway A mortgage broker does not offer a loan directly, rather presents options for you to compare.

Finding affordable homeowners insurance

No matter which type of lender you choose, you will need to have a home insurance policy in place to be approved for your mortgage. While you are busy finding the perfect lender, let

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The experts at Jerry work with the top home and car insurance brokers to explore all your options—including any discounts and bundling—and present you with options in minutes. If you’re hesitant to switch plans or insurance providers because you’re worried about the work involved, don’t be.

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does all the legwork to find your best options! And if you have any questions along the way, just text one of our agents through the app. They will always be there to assist you.

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FAQ

What is a mortgage broker?

A mortgage broker is an agent not affiliated with any direct lender. For a fee, they will explore options from multiple lenders to find the loan that works best for you, and support you through the application process.

Do you need the same credit for a mortgage lender and a bank?

Typically, mortgage lenders have more flexibility than federally insured banks. Banks tend to be more conservative in their lending. For example, most banks require a 600 credit score for an FHA loan, but mortgage lenders will go as low as 580.

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