Mortgage Banking Explained: Types of Mortgage Bankers and More

Mortgage banking is a complex process, but it's essential to understand the basics. Mortgage bankers are financial experts who facilitate the lending process between borrowers and investors.

Mortgage bankers can be categorized into two main types: correspondent lenders and wholesale lenders. Correspondent lenders work with smaller banks or credit unions to originate and sell mortgages, while wholesale lenders sell mortgages to larger investors.

These lenders play a crucial role in the mortgage banking process, as they help to match borrowers with the right investors. Their expertise and knowledge of the market are vital in ensuring a smooth transaction for all parties involved.

There are different types of mortgage bankers, each with their own approach to originating and servicing mortgages. A mortgage banker can be a company, individual, or institution.

A mortgage banker can originate all types of loans, giving you flexibility in the type of loan you can apply for. This is a key difference between a mortgage banker and a loan officer, who typically only offers products and interest rates set by a single financial institution.

A mortgage banker's primary business is to earn the fees associated with loan origination, and most do not retain the mortgage in a portfolio.

Traditional banks are making a comeback, and it's a great thing for borrowers. In 2021, only two traditional financial institutions ranked in the top 10 list of largest lenders.

Banks tend to focus on borrowers with high mortgage balances, reflecting a focus on home loans as part of their overall services to their best customers. This shift is a significant change from a few years ago when non-bank lenders were the norm.

If you're planning to buy a property, you may be able to get a loan from a traditional bank, which can be a good option. Mortgage bankers, on the other hand, work for an institution and can only make loans from their institution, which may limit your options.

Banks are now competing with non-bank lenders, offering more choices for borrowers. This competition can be beneficial for consumers, as it drives down prices and increases options.

Mortgage bankers can be categorized into two main types: those who work for a single financial institution and those who work independently.

A mortgage banker who is tied to one financial institution can originate loans and provide funds for home purchases. This type of mortgage banker uses their own money or borrowed funds to fund mortgages.

Mortgage bankers who work independently can help you shop around for a good deal from multiple lenders or bankers. They facilitate the process of finding the best loan for your situation, but they don't fund loans themselves.

Some mortgage bankers retain the mortgage in a portfolio, while others sell the mortgage to an investor. They might also service the mortgage or sell the servicing rights to another financial institution.

Here are the two main types of mortgage bankers:

Ultimately, the type of mortgage banker you need will depend on your individual circumstances and loan requirements.

The loan process is a crucial step in the mortgage banking journey. It begins with originating the loan, which involves qualifying and verifying the buyer's right to that loan.

Many homebuyers receive preapproval for a loan before deciding on a home, but this doesn't guarantee approval. The lender will assess the home's appraisal value, the borrower's credit score, employment status, and financial position to determine final approval.

Changes in lender guidelines or taking out other major loans can also affect the loan's approval status. The lender will process the loan paperwork and distribute the funds from the mortgage once the loan is approved.

Determining whether to offer a loan is a crucial step in the loan process. A mortgage banker will consider several specific criteria to approve a loan, including the buyer's credit score, debt-to-income ratio, the price of the home, and the buyer's down payment amount.

The buyer's credit score plays a significant role in determining the type of loan they qualify for. A good credit score can qualify a buyer for a fixed-rate loan, while a poor credit score may require a government-insured loan.

The mortgage banker will also consider the buyer's debt-to-income ratio to determine how much they can afford to borrow. This ratio is calculated by dividing the buyer's monthly debt payments by their monthly gross income.

A mortgage banker needs to determine what type of loan to offer to specific buyers. They will consider factors such as the buyer's credit score, debt-to-income ratio, the price of the home, and the buyer's down payment amount to decide between a fixed-rate loan or an adjustable-rate mortgage.

Here are some common loan options that a mortgage banker may consider:

The top 10 lenders by originations are a significant force in the mortgage industry. United Wholesale Mortgage takes the top spot, originating 294,000 loans worth nearly $108.5 billion in 2023.

Rocket Mortgage is a close second, originating nearly 289,000 loans worth $78 billion in 2023. This is a significant drop from their boom year of 2021, when they made over 1.2 million loans worth $340 billion.

Bank of America is a major player, originating 92,000 loans worth $28 billion in 2023. They ranked third in the J.D. Power survey, with a score of 760.

Fairway Independent Mortgage also made the top 10, originating 86,000 loans worth $27 billion in 2023. They ranked seventh in the J.D. Power survey, with a score of 746.

Here are the top 10 lenders by originations:

In the world of mortgage banking, there are several key players who play a crucial role in helping you achieve your dream of homeownership.

A mortgage banker is a company or individual that originates mortgages, using their own or borrowed funds. They earn fees from loan originations and work in the loan department of a bank or financial institution.

Mortgage bankers are responsible for evaluating the property, collecting financial information, and securing the loan. They also act as advisors to borrowers, helping them choose the best loan option.

A mortgage banker typically works in the loan department of a financial institution, credit union, savings and loan association, or bank. They have the ability to approve a mortgage for a lender and can be the difference between an approved loan application and a rejected loan application.

Here are the key differences between a mortgage banker and a loan officer:

Mortgage bankers, unlike loan officers, can offer multiple loan products and have more flexibility in loan options. They can also originate all types of loans, giving you flexibility in the type of loan you can apply for.

A mortgage broker, on the other hand, doesn't distribute loans directly. Instead, they work with multiple lenders to connect buyers with the bank or institution they need to get a loan for their mortgage. Mortgage brokers will generally charge a fee for connecting buyers with lenders.

A mortgage banker is a company or individual that originates mortgages, using their own or borrowed funds. They earn fees from loan originations, typically working in the loan department of a bank or financial institution.

Mortgage bankers can approve or reject a mortgage application, and they also act as an advisor to borrowers, helping them choose the best option. They use their own funds to fund loans, which is a key difference between bankers and brokers.

Here are the key roles of a mortgage banker:

The history of mortgage banking in the US is a story of significant change. The market share for mortgage banks in the US of single-family mortgage loans went from 20% in 1980 to over 41% in 1991 during the Savings and Loan Crisis.

This shift was largely driven by the increasing role of housing finance companies and banks in the mortgage market. Housing finance companies and banks have become major players in the US mortgage market.

The Savings and Loan Crisis had a lasting impact on the mortgage industry, paving the way for the growth of mortgage banks.

A mortgage banker typically works in the loan department of a financial institution, a credit union, a savings and loan association, or a bank. They work with realtors and individuals seeking loans through the entirety of the mortgage process, from evaluating the property to collecting financial information and securing the loan.

Mortgage bankers close loans in their own names, using their own funds or the funds of their institutions. This means they take on the risk of lending, but also have more control over the loan process.

A mortgage banker can only make loans from their institution, which means they have to make sure the loans are properly secured and the borrower is qualified to make the monthly payments. They're paid by their institution, typically on a salary, although sometimes institutions offer performance-based bonuses.

Mortgage bankers work for an institution, which means their loyalties lie with their institution. This can impact their decision-making process, as they need to make sure the loans are profitable for their employer.

Here are some key differences between mortgage bankers and mortgage brokers:

Mortgage bankers are advisors to borrowers, helping them choose between the institution's various loan options. They work with borrowers to evaluate their financial situation and determine the best loan option for their needs.