Mortgage Professionals–What’s the Difference?

Finding funding for your new home purchase can be very confusing–should I go through my current bank or credit union? What is a mortgage broker versus a mortgage banker.  Here are a few tips and definitions.

Retail Lender–This would be your local bank or credit union and you would typically work with a loan officer.

Mortgage Broker–The broker is an intermediary who will look at your finances and find a lender who is a good fit for you and will come up with the best terms and rates.  For instance, if you have had past credit issues, they will have a list lenders who are willing to finance cases such as yours.  If you are a VA buyer, they will have a list of VA lenders.

Mortgage Banker–A mortgage banker will fund your loan initially but then sell the loan to secondary lenders. Fannie Mae and Freddie Mac are secondary lenders.

Your realtor can help you with finding possible sources of financing but it ultimately up to you as the Buyer.  Your realtor should not push you toward any particular person as the lender.  Do your own research, don’t be afraid to ask lots of questions.  You will pay for the services of the various types of mortgage people discussed here but many will also be paid by the lender who ultimately has the loan.

Most Important–Get Pre-qualified before starting the home search process!  This will save you and your realtor lots of time and heartache.  You need to know how much you qualify for and if you have any issues in your employment or credit history that should be addressed before making any offers.

Buying in a Seller’s Market

Are you looking to buy a home and have been told its a Seller’s Market?  That means there are more people looking to buy than there are available homes.  Typically, this means a short supply of homes with prices moving up.  If you are on the buying side, you need to be prepared. Hopefully, you are working with a realtor who can get you the real statistics on unsold houses and the time it is typically taking homes to sell.  If the average time to sell is less than 4 months, it is usually a Seller’s Market.  What can you do as the Buyer?

  •  Determine your priorities.  Is it location, size, number of bedrooms, two-story or one-story, size of lot, garage? You can make your and your realtor’s search a lot more efficient if you and your mate have already come to some agreement about priorities. Too often couples start looking at houses and find they have totally different ideas about the house that would work for them.
  • Have your financing in order.  Not only get pre-approved by a lender but also get all of your other paperwork together and submitted.  This will help avoid any nasty surprises. Be honest with your realtor about the price range you that makes you comfortable and what your real maximum price is. Sometimes, if you are willing to go up even a small amount it will open up a lot of other housing possibilities.
  • Be prepared to make decisions quickly.  In a Seller’s Market there may be other buyers who are looking at the same properties.  If you wait several days to make a decision, the property may already by under contract.

The Effect Changing Jobs Has on Buying a Home

changes-signFor most people, changing employers will not really affect your ability to qualify for a mortgage loan, especially if you are going to be earning more money. For some homebuyers, however, the effects of changing jobs can be disastrous to your loan application.

How Changing Jobs Effects Buying a Home

Salaried Employees

If you are a salaried employee who does not earn additional income from commissions, bonuses, or over-time, switching employers should not create a problem. Just make sure to remain in the same line of work. Hopefully, you will be earning a higher salary, which will help you better qualify for a mortgage.

Hourly Employees

If your income is based on hourly wages and you work a straight forty hours a week without over-time, changing jobs should not create any problems.

Commissioned Employees

If a substantial portion of your income is derived from commissions, you should not change jobs before buying a home. This has to do with how mortgage lenders calculate your income. They average your commissions over the last two years.

Changing employers creates an uncertainty about your future earnings from commissions. There is no track record from which to produce an average. Even if you are selling the same type of product with essentially the same commission structure, the underwriter cannot be certain that past earnings will accurately reflect future earnings. Changing jobs would negatively impact your ability to buy a home.


If a substantial portion of your income on the new job will come from bonuses, you may want to consider delaying an employment change. Mortgage lenders will rarely consider future bonuses as income unless you have been on the same job for two years and have a track record of receiving those bonuses. Then they will average your bonuses over the last two years in calculating your income.

Changing employers means that you do not have the two-year track record necessary to count bonuses as income.

Part-Time Employees

If you earn an hourly income but rarely work forty hours a week, you should not change jobs. There would be no way to tell how many hours you will work each week on the new job, so no way to accurately calculate your income. If you remain on the old job, the lender can just average your earnings.


Since all employers award overtime hours differently, your overtime income cannot be determined if you change jobs. If you stay on your present job, your lender will give you credit for overtime income. They will determine your overtime earnings over the last two years, then calculate a monthly average.


If you are considering a change to self-employment before buying a new home, don’t do it. Buy the home first.
Lenders like to see a two-year track record of self-employment income when approving a loan. Plus, self-employed individuals tend to include a lot of expenses on the Schedule C of their tax returns, especially in the early years of self-employment. While this minimizes your tax obligation to the IRS, it also minimizes your income to qualify for a home loan.

If you are considering changing your business from a sole proprietorship to a partnership or corporation, you should also delay that until you purchase your new home.