Is This Company a Direct Lender, a Bank, or a Broker Connecting Me to Outside Lenders?
It depends on the company, so ask it directly which it is and which institution will underwrite and fund your loan. A direct lender or bank approves and funds the loan itself. A broker or a lender network connects you with outside licensed lenders that do. None of these models is better or worse by nature; what matters is that everyone involved is licensed and that you know who's making the loan.
Last updated September 29, 2026What's the difference between a direct lender and a broker?
A direct lender approves, underwrites and funds your loan with its own money or credit lines, and often services it afterward. A broker doesn't fund loans. It shops your application with outside lenders, often wholesale lenders, to find you an offer. Networks and referral services work similarly, connecting you with licensed partner lenders rather than funding the loan themselves.
Do I pay extra to use a broker?
It depends on how the broker is paid. Under Regulation Z, a broker can be paid by the lender or by you, never both on the same loan. If the lender pays, the cost is built into your rate rather than billed as a separate fee. If you pay, the fee is disclosed and paid at closing. Ask how the company and the loan officer are paid before you go ahead.
How do I find out who's actually handling my loan?
Ask, and read your documents. Federal rules require the loan originator's name and NMLS ID to appear on your application, note and mortgage, so you can see who you're working with and look them up.
- A specific lender and loan officer are named in a call or email: that lender is likely the one underwriting and funding the loan.
- The company calls itself a referral or network service: a licensed partner lender may do the underwriting and funding.
- You're not sure: ask whether you're dealing with a direct lender, a broker or a network, and which institution will underwrite your loan.
Our network requires every partner lender to be independently licensed before a file is referred to them, and you can ask at any point which institution is reviewing your file.
| Direct lender or bank | Underwrites and funds the loan itself |
|---|---|
| Mortgage broker | Shops your loan to outside lenders; doesn't fund it |
| Network or referral service | Connects you with a licensed partner lender |
| Licensing | Loan originators are licensed or registered under the SAFE Act |
Related questions
Sources
- https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-mortgage-lender-and-a-mortgage-broker-en-130
- https://www.consumerfinance.gov/rules-policy/regulations/1007/102
- https://www.consumerfinance.gov/rules-policy/regulations/1026/36/
- https://www.law.cornell.edu/cfr/text/12/1026.36
- https://dfi.wa.gov/documents/credit-unions/compliance-manual/safe-overview.pdf
- https://mortgage.nationwidelicensingsystem.org/knowledge/Products/nmls/aboutNMLS/SitePages/SAFE.aspx
Sourced from licensed loan officers and brokers in the FreeRateUpdate network.
Educational information only, not individualized financial or legal advice. Program details and rates change; verify current terms with a licensed loan officer before making a decision.