The mortgage industry is filled with jargon that can overwhelm and confuse the best of us. 

Perhaps no two terms are more important—and easy to muddle—than mortgage broker and mortgage lender. Understanding their differences and where they overlap is a first step to managing the homebuying journey successfully. 

To help remove any confusion, we’ll cover how each group operates, and when you should work with a mortgage broker—versus only a lender. 

Related: A list of mortgage acronyms to be aware of

Mortgage lenders offer loan products to homebuyers and brokers 

You’ve no doubt heard of the big-ticket mortgage lenders. They include the likes of Quicken Loans, Wells Fargo, and JPMorgan Chase. But the market is becoming increasingly diverse. You’ll find local lenders and online tech companies joining in.

Each lender offers their own set of lending products. They also provide different experiences for borrowers—as proven by the reviews on sites like LendingTree. You can work directly with a lender to get a loan through their loan officer. Just remember that their incentives are based on you closing with their institution. This can ultimately bias the insights and recommendations they offer. 

Mortgage brokers are the trusted middleman 

A mortgage broker acts as an intermediary between you and the lender throughout your home-buying journey. They employ mortgage loan officers (MLOs) and mortgage processors. Both types of staff are licensed and have a deep understanding of the industry. MLOs will help you review different loan options and lock a rate, while processors are equipped to handle the rest of the steps through closing. 

More holistically, you can expect mortgage brokers to:

  • Help you understand the types of loans that make sense for you 
  • Leverage their existing partnerships with lenders to show you a variety of loan options
  • Answer any questions throughout the application process so you can close on time

Like lenders, not all brokers are the same. Some of the criteria you should consider while evaluating different brokers include: the quantity and quality of lenders they work with, their online reviews, and the level of guidance and support from their team. 

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Finally, mortgage brokers might differ in how they make money. Some may charge you directly by a small percentage of your loan—think 1-2% of the total loan value. More commonly, they’ll charge the lender by a percentage in that range.

Related: The key differences between annual percentage rates and interest rates

Mortgage broker vs lender: How to decide when to work with a broker

So when should you work with a mortgage broker and when should you go straight to a lender? Here are some situations that can help inform your decision:

Scenario A: You want to shop around for the best rate.

If managing your budget is a priority, you should evaluate as many lenders as you can to ensure you find the loan option with the lowest rate and closing costs. You can turn to a quality mortgage broker to get options from a variety of lenders quickly.

Scenario B: You need to work fast to close your loan on time.

If there are just weeks between now and when your signed purchase contract is set to close, time is of the essence.

Getting mortgage insurance, title insurance, reviewing and signing the closing disclosure, scheduling the appraisal, among several other steps, can make it near impossible to go it alone quickly. A mortgage broker can expertly handle several of these tasks for you, and keep you on top of things in case there’s something you forget.

Scenario C: You’re new to home buying or don’t remember a lot of the steps involved.

As mentioned in the last scenario, the steps for getting a mortgage are numerous. It’s easy to forget one or do any inadequately. If it were straightforward, mortgage brokers wouldn’t exist! The mortgage brokers take the load off your back. And a good mortgage broker leaves you with tasks that are clear and easy. 

Scenario D: You’re well-versed in homebuying and have time to shop around.

If you’ve bought a home before and feel comfortable doing it again on your own, you may not need the consulting and support services that a mortgage broker provides. Also, if you have the bandwidth to request and evaluate rates from multiple lenders, you may not need the rate shopping services from mortgage brokers either. 

In short, you can try working with a lender directly. Just keep in mind that some lenders work with mortgage brokers exclusively, and others offer lower rates to mortgage brokers. This means that mortgage brokers may help you unlock more competitive rates than you could find on your own.

With this background on the two groups in mind, you can feel confident about deciding whether you need a mortgage broker, and the type you’d like to work with.