What is the difference between a mortgage broker and a lender?

• A. A mortgage broker provides funds directly to borrowers, while a lender acts as an intermediary.
• B. A mortgage broker offers advice, while a lender does not.
• C. A mortgage broker acts as an intermediary between borrowers and lenders, while a lender provides the actual funds for the loan.
• D. A mortgage broker only works with large banks, while a lender works independently.

Answer: (C)

A mortgage broker serves as an intermediary in the loan process, connecting borrowers with lenders without actually providing the funds themselves. This role involves assessing the needs of the borrower and finding a suitable loan product from various lenders that might be a good match. Essentially, the mortgage broker facilitates the application process and helps borrowers navigate their options by shopping around for the most favorable terms and interest rates.

On the other hand, a lender is a financial institution or entity that has the capital necessary to provide loans directly to borrowers. Lenders can include banks, credit unions, and mortgage companies. They not only provide the funds for the loan but also handle the underwriting and approval processes.

Understanding this distinction clarifies how the mortgage process works—borrowers benefit from the expertise and access that brokers provide, while lenders play a crucial role in financing the loans.