Difference Between a California Mortgage Broker, Banker, and Direct Lender

In California, the mortgage industry is comprised of many different types of individuals, companies and institutions. And this can be confusing for borrowers, especially first-time home buyers who haven’t been through the loan process before. So let’s see if we can clear some things up.

This article explains the differences between a California mortgage broker, a mortgage banker, and a direct lender. Once you understand these different roles, you’ll have an easier time navigating the home loan process.

What Is a Mortgage Broker?

A California mortgage broker connects borrowers with lenders. In that sense, you could think of the broker as a kind of “matchmaker.” He or she will review the borrower’s financing needs, and then try to find a lender who offers a suitable loan product.

Mortgage brokers do not use their own money to originate and fund home loans. As mentioned above, they act as a kind of liaison between you and the lender. A broker can help you find the right mortgage product for your particular needs, and also gather up the paperwork needed for underwriting and approval.

As in other states, California mortgage brokers typically earn a commission for the loans they originate. They can also be compensated through an origination fee. All of this should be disclosed to you up front, by the way. But be sure to ask about it if you’re not sure.

There are certain advantages to working with a mortgage broker in California. Arguably the biggest benefit is that it gives you access to a broader range of loan offerings. California mortgage brokers (like Bridgepoint Funding) can work with a variety of direct lenders. This gives them more flexibility, when it comes to matching the borrower to the most suitable loan.

What Is a Mortgage Banker?

Moving on to the next industry professional. A mortgage banker is an individual, company or institution that originates home mortgage loans. But unlike the brokers mentioned above, California mortgage bankers actually use their own funds (or the funds of their institution) to fund the home loan.

Note the key difference there: A California mortgage broker will originate home loans that are usually funded by a direct lender. A mortgage banker, on the other hand, can originate and fund the loan.

At first glance, you might think there would be an advantage to using a California mortgage banker over a broker. It might seem like a more streamlined experience, at least on the surface. But you have to realize that a mortgage banker usually works for a bank, a credit union, a savings and loan association, or some other financial institution. So they can only offer you the loan products provided by that particular organization.

It’s an important point that bears repeating:

• A mortgage banker can only offer loans from their own institution.
• A broker, on the other hand, can offer loans from multiple different lenders.

This ties back to a concept covered earlier. When working with a California mortgage broker, you could gain access to a much larger range of home loan products. That’s because a broker could have many lending partners. When working with a mortgage banker, on the other hand, you might have fewer options to choose from.

What Is a Direct Lender?

Lastly, we have the direct lender. You can think of the direct lender as a financial institution or company, whereas the mortgage broker and banker might be one individual.

There are several types of direct lenders in California. They include local and regional banks, credit unions, as well as web-based mortgage lending companies.

When it comes to a direct lender, all of the mortgage professionals work for the same company. The loan officers, underwriters, closers, and even the people who fund the loan — they all work for one company.

If you apply for a mortgage loan through a direct lender, you’ll probably end up working with a loan officer. Loan officers act as the sales force of a financial institution, and they typically earn commission for the mortgage loans they originate.

Here again, you might have limited options when working with a direct lender. That’s because they can only offer you their own mortgage products. In some cases, this can present obstacles to the borrower. If you go to a bank, for example, and you fail to meet their rigid criteria for home loans — you’re out of luck.

But when working with a mortgage broker, you have access to more products and could therefore have a better chance at getting approved.

We Help Borrowers All Across California

Bridgepoint Funding is a California mortgage broker. This means we work with multiple lenders to help our clients find the most suitable type of loan. While we’re located in the Bay Area, we serve borrowers all across the Golden State.

If you’re in the market for a home loan, feel free to reach out to us with your questions. We could even pre-approve you for a mortgage loan, to give you an advantage in the real estate market. We look forward to hearing from you!