There are a couple of options for who you select as your loan provider. The first is a mortgage bank and the second is a mortgage broker. Both of these have their advantages and disadvantages and this article will explain the difference and a few of those advantages and disadvantages.

The mortgage bank is usually your local bank that will lend you money directly. For instance, in Salt Lake City and regions in and around Utah, a mortgage bank would be Zions Bank. This means that should you select a Zions Bank branch, you’d work with a bank employee (a loan specialist) to take your application and work through the process of getting you approved. The decision to approve you or not is usually kept within Zions Bank meaning that their own underwriting department would either approve you or decline your application.

The mortgage bank will take the loans that they approve and typically sell them as a package to the secondary market. This doesn’t affect your loan amount, your rates, or anything else about the loan itself except that your statements may not be coming from Zions after the loan has been sold. This is typical and usually doesn’t have any affect on your loan or monthly obligations.

The benefits of a mortgage bank include a local presence insured by the federal government and what would probably be considered a trustworthy entity. The employees are typically not paid on commission and don’t make “points” the same way a loan officer would which means there’s less incentive to sneak in hidden fees at an employee level. The bank may be in a position to approve your loan more quickly than a loan officer through other lending options.

Although the mortgage bank will tend to be competitive with its pricing, you will have less loan products available as you’re limited on whatever loan products that mortgage bank offers. The alternative to this is to work with a loan officer or brokerage that has relationships set up with multiple lenders and can offer you products from any number of different lenders. This is less of a worry unless you’re really looking at doing some creative financing. Of course, you can include both the mortgage bank and a loan officer in the types of loans and offerings you have access to as a borrower.

The mortgage brokers and loan officers represent the other type of lenders or home loan providers. Salt Lake City loan officers and LOs in general in Utah earn money in two ways. The first is through upfront fees, such as a loan origination fee. The other is in a fee paid to the loan officer through what is called Yield Spread Premium. These fees are how the loan officer and the mortgage brokers make their money. So the higher the rates, the higher the yield spread premium and the higher the overall cost to you the borrower.

The rates generally don’t change too much between the two types of loan providers and even though the advertised rate is not always what you’ll get, all of the brokerages and mortgage banks will typically advertise the lowest possible rate to get you in the doors. There are other fees you’ll want to learn about before signing for your Salt Lake City mortgage or any mortgage for that matter.