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Mortgage broker vs. lender

There are pros and cons to both, but which is right for you?

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Looking for a home almost always involves a search for the perfect home loan — only a small portion of the population can afford to buy a home in cash.

If you want more guidance, you can use a mortgage broker, which is an intermediary that helps find a home loan that fits your needs and situation. A direct lender, on the other hand, uses money of its own to fund and originate mortgages.

In this article we break down the pros and cons of each to help you decide which is best for you.

How does a mortgage broker work?

A mortgage broker is a liaison that connects a potential homebuyer with fitting lenders. A broker doesn’t use its own funding but gathers all the necessary information (paperwork, fee scales, documentation, etc.) before underwriting and approval can take place.

A mortgage broker makes its money through fees. These fees are often paid by the homebuyer (called “brokerage fees”).

Direct mortgage lender pros and cons

There are positives and negatives to working with a direct lender like a bank, credit union or mortgage company. When you choose a direct lender, you’ll get access to its loan officers, processors, underwriters and closers, as well as the actual funders.

One plus is that you can work with a direct lender you already have a business relationship with — for instance, the bank that holds your checking or savings accounts. This route can get you better rates and extra perks.

However, if a lender you’re considering runs your credit and you don’t qualify based on its regulations, you’ll have to go to another (and then possibly another) — and each of these can be a hit on your credit. If your credit is suffering already, this can make it even worse.

Multiple hard credit checks within a certain period are often grouped together as one by credit bureaus, but specific terms vary, so do your loan shopping in a 14-day period if possible.


  • Assigned loan officer throughout the life of the loan
  • No broker fees
  • Potential perks for using your current bank
  • Can get better rates and lower closing costs


  • Fixed loan origination fees
  • Rigid programs that often won’t cater to special circumstances
  • Limited to institution’s programs

Mortgage broker pros and cons

A broker can help you wade through your bank and lender options, which can save you time and make the loan-shopping process more convenient.

Mortgage brokers also usually have several lenders within their networks, which gives you plenty of options to choose from. You can weigh the plusses and minuses of each organization and choose the one that fits your needs. This can be helpful, especially if you’re a specialized borrower (e.g., if you’re self-employed or have low credit).

One thing to keep in mind is that your broker’s interests could conflict with your own. Some brokers have agreements with particular lending institutions, and they could be promised bigger payouts if they push borrowers toward these options.

There are also lenders who don’t work with mortgage brokers, which means you could miss out on a connection with a good fit if they don’t have a partnership with your broker.


  • Helps you navigate your options
  • Access to info from a wide variety of institutions
  • More buyer flexibility, especially for special situations
  • Peace of mind in working with someone who knows the market


  • Could have conflicts of interest
  • Potentially expensive broker fees
  • Certain lenders might not work with brokers
  • Possibility of higher rates and closing costs

How to find a mortgage broker

If you’re an atypical borrower (you don’t have W-2s to show, you’re self-employed, etc.), a broker with plenty of resources at its disposal can come in handy — but you want to make sure you work with a trusty broker that’ll help you find the best borrowing option for you.

It’s a big red flag if a broker’s past clients felt pushed into a particular option.”

A good mortgage broker will do most of the heavy lifting for you. It should do this quickly, efficiently and on your schedule. It’s a big red flag if a broker’s past clients felt pushed into a particular option.

A real estate agent should be able to help you find a broker with good reviews and a history of happy clients.

How to choose a mortgage lender

You can feel confident choosing a direct lender when it has good reviews, is honest and transparent with all information and can offer you a reasonable mortgage rate and terms.

It’s smart to check with your bank or credit union before searching for other lenders — if you already have a strong relationship with a financial institution that funds mortgages, it’s possible it can offer you a better loan as a reward for your loyalty.

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    Bottom line: Should I work with a broker or a direct lender?

    Ultimately, this decision depends on your situation. If you want more guidance in navigating the market, a broker could be a good call. If you have a good lending option from your bank or credit union, though, this might be the best deal you’ll find anywhere.

    When making the call between a broker and a lender, the most important thing to remember is to do your research, weigh the pros and cons of your options and trust your gut.

    If an institution or company you’re considering has positive reviews and a solid track record — and makes you feel like your financial and personal interests matter — then you might be in a good position to move forward. In the same vein, if a broker or lender gives you an “off” feeling, it’s a good idea to look elsewhere.

    For more, see our article on mortgage lenders versus banks.

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