Mortgage Broker vs. Lender: What Are the Differences?

By Indeed Editorial Team

Updated September 6, 2022 | Published December 7, 2020

Updated September 6, 2022

Published December 7, 2020

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

When someone aims to buy a new home or another type of property, they often need a mortgage. Working with mortgages can be a rewarding and lucrative way to help others find their ideal residence. Both mortgage brokers and lenders work in this field, but they're different occupations with varying tasks. 

In this article, we detail the main differences between a mortgage lender and a mortgage broker and provide the steps to enter both career fields so you can decide which path is best for you.

What is a mortgage broker?

A mortgage broker is a professional who works with individuals and financial institutions to secure money for mortgage financing. This means they review the needs of their clients and identify how much money they might need and who might provide it. They could negotiate rates to help find financial solutions that fit their clients' needs.

What is a lender?

Lenders, or mortgage lenders, are professionals or financial institutions that provide financial assistance to clients. They often work for banks and perform duties like credit checks and assessments to understand peoples' abilities to pay mortgages. Lenders often work with brokers rather than clients as intermediaries to understand borrowers' needs and provide solutions.

Mortgage broker vs. lender

There are several key differences between a mortgage broker and a lender:

Use

Both mortgage brokers and lenders help people obtain financing for their real estate purchases. Since homes, commercial properties and other types of real estate can be costly, few people can pay for these purchases with cash. Instead, most seek the assistance of a mortgage professional, like a mortgage broker or mortgage lender, to help them make the purchase. The mortgage professional helps the real estate investor identify and obtain adequate financing to buy their property.

Related: How Much Does a Mortgage Broker Make?

Handling money

Both of these financial professionals are essential in how a person obtains financing for their mortgage. A mortgage broker is an intermediary who helps real estate investors find the best lender, rate and terms for their mortgage. A mortgage broker doesn't actually provide the money to their client. A mortgage lender is usually a bank or other financial institution that provides their client with the upfront payment to the seller and to whom the real estate investor pays their monthly mortgage payment.

Some real estate investors use a mortgage broker and a mortgage lender to buy a home or other property. In contrast, others directly seek a mortgage lender, often their personal bank, to obtain financing on their own without the help of a middleman.

Education

A high school diploma is often the minimum level of education required for a mortgage broker and a lender. While in school, focus on subjects like statistics and algebra. Mortgage brokers also need good interpersonal skills, so consider working on developing your communication skills if you want to pursue this role.

Some mortgage brokers obtain associate degrees or bachelor's degrees before entering the job market. While a college education might not be a requirement to become a mortgage broker or lender, often, the more schooling you have, the better your job options. Consider a degree in business administration, accounting, finance or a related field. For lenders, you can consider degrees in a degree in finance, business, economics or accounting.

Testing and examinations

All mortgage brokers must have a broker's license to perform their jobs, regardless of their state of residence. The National Mortgage License System (NMLS) provides information for available classes in every state. Once you've completed your prelicensure coursework, you sit for the SAFE Mortgage Loan Originator Test. This exam has federal and state sections to ensure you have the proper understanding of mortgage brokerage practices at every level to perform the job. Lending positions typically don't require testing and exams to perform their duties.

Licensure and certification

Mortgage broker positions typically require a license to practice in each state. This often happens after you start your own business in the field. After establishing your business officially with the state, you typically need to apply for your mortgage broker license and your mortgage broker bond. This process differs by state, so seek specific guidance from your state licensing agency for instructions. To become a lender, you might need certification from the homeowner's association (HOA).

Related: Real Estate Brokers vs. Agents: What's the Difference?

Role

The role of a mortgage broker is often a position working as an intermediary between clients and financial institutions. They often find the most suitable financial partners for their clients through research and understanding of their client's financial situations. Lenders can be individuals, but the term usually refers to financial institutions that lend financial assistance to individuals.

Related: How To Become a Mortgage Loan Officer in 8 Steps

Business ownership

Mortgage brokers typically have two options when performing their duties. You can join an already established brokerage or start your own. If you want to join an existing business, seek open positions through your professional network or online job postings. If you'd like to start your own brokerage, you register your brokerage with your state. To become a lender, you can pursue positions at banks or other financial institutions. You can pursue leadership opportunities through promotions, like becoming a bank manager.

Related: A Career in Real Estate: Frequently Asked Questions

Relationships

For mortgage brokers, you can build relationships by working with clients. The best way to find clients is to form relationships with real estate agents. In most cases, real estate agents recommend a specific mortgage broker to their clients during the home buying process. The more connections you build and referrals you receive, the more clients you're likely to get.

For lenders, the process may be similar. You might develop relationships with particular clients that refer you to their friends and family, helping you reach any quotas and finish more deals. You might establish professional relationships between branches through finance events, conferences or networking events.

Skills

Both roles share a lot of skills, like client management, communication and problem-solving. Lenders may require different expertise in finance, banking and administrative duties specific to regulations and institution requirements. Mortgage brokers might need additional research and business administration skills if they hope to own their own brokerage when helping their clients.

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