What’s the Difference Between a Mortgage Broker and Direct Lender?


When it’s time for you to apply for a mortgage, where do you turn to in order to get one? Should you work with a mortgage broker, or a direct lender? Or are they even the same thing?

The terms “brokers” and “lenders” tend to be used interchangeably, but they’re actually different. Read more to distinguish one from the other so you can make a more informed decision about who to work with to get your mortgage.

Direct Lenders

Direct lenders include financial institutions that can are able to offer home loans. This can include commercial banks and other entities that are capable of directly loaning you the money needed to finance a home purchase. Direct lenders handle all aspects of home loan origination, including applications, loan terms, processing, underwriting, and closing.

If you go this route, you will need to fill out and submit a mortgage application to each direct lender individually. You will also be tasked with contacting each direct lender yourself if you choose to shop around for the best quote, which can prove to be cumbersome and time-consuming.

That said, direct lenders might be better able to handle any potential problems that could pop up during the application process. A mortgage broker might not necessarily be able to address all issues that could come up or answer all the questions that a direct lender might have in regards to your application. As such, the process can be quicker with a direct lender.

Mortgage Brokers


Unlike direct lenders, mortgage brokers don’t actually loan out the money needed for a mortgage. Instead, they are individuals who get quotes from various lenders on behalf of their clients. Borrowers then use the quotes provided by their mortgage broker and compare them to each other before deciding on which package to take. 

Brokers don’t have a hand in all functions of the loan origination process, and typically only deal with applications and loan processing. Basically, mortgage brokers communicate between lenders and borrowers.

With this option, you only need to fill out one mortgage application which is then submitted to various lenders through your broker. This is a big advantage as you will only have to talk to one broker as opposed to several direct lenders when shopping around for a home loan.

However, the process can take longer compared to working with a direct lender because there is an extra party involved in the communication process. Working with a mortgage broker can also come with higher fees associated with processing the mortgage, which is how they are essentially paid for their services. That means that you are paying for both the broker’s fees as well as the lender’s fees, which makes this a potentially more expensive option.

The Bottom Line

There are pros and cons associated with both mortgage brokers and direct lenders. A mortgage broker can do all the legwork for you and shop around for the best quote on your behalf, but they also typically come with higher fees. At the end of the day, your end goal is to find a mortgage package that is best suited to your needs and financial situation, and both direct lenders and mortgage brokers can assist you with that.