Mortgage Broker: A Mortgage broker is an individual or company that charges a service fee to bring borrowers and lenders together for the purpose of loan origination.

Mortgage brokers work on commission. They charge borrowers a fee called points for their loan brokering services. A mortgage broker, on the other hand, usually does not have money to lend. A broker acts as an intermediary between the borrower and the lender. You submit a loan application and all of your supporting financial documentation to your broker, rather than directly to a lender. The broker hires a lender-approved appraiser to appraise the property for you. Brokers shop the mortgage market for their consumers to find the best interest rate and terms possible. When the borrower decides on a mortgage product, the broker assembles the loan package, which consists of the borrower's application, financial documents and the appraisal, and submits it to the lender for approval. The lender's underwriters grant final approval.

A big benefit in using a broker is that he or she can quickly move you from one lender to another if for some reason you have difficulty qualifying. Also a broker may have access to a larger array of mortgage products than might be available from an individual lender.

A mortgage banker is a direct lender. He lends you his own money. Mortgage bankers (also known as "direct lenders") sometimes retain servicing rights as well.

A mortgage broker is a middleman; he does the loan shopping and analysis for the borrower and puts the lender and borrower together. Many of the lenders through which the broker finds loans do not deal directly with the public (hence the expression, "wholesale lender").

Using a mortgage banker can save the fees of a middleman and can make the loan process easier. A mortgage banker can give you direct loan approval, whereas a broker gives you information second-hand. However, many mortgage banks are limited in what they can offer, which is essentially their own product. Using a mortgage broker allows an individual to present a loan application to a different lender in a different light.

A mortgage broker charges a fee for his service, but has access to a wide variety of loan programs. He also may have knowledge of how to present your loan application to different lenders for approval. Some mortgage bankers also broker loans. As an investor it is wise to have both a mortgage broker and a mortgage banker on your team.