A mortgage banker is an entity, such as a company or a person, that originates and sells mortgage loans directly to a borrower. A mortgage banker sometimes services mortgage loans as well; however, in most cases, the mortgage banker sells the loan to a secondary mortgage company soon after closing. Mortgage bankers are also called direct lenders or non-institutional lenders.

A mortgage banker is often confused with a mortgage broker even though there is a significant difference between the two. A mortgage broker acts as a "go between" or intermediary between a person or company that needs financing for a mortgage loan and a lender who has money available to finance a mortgage loan; but a mortgage broker does not actually lend money. That is, the mortgage broker only brings the lender and borrower together whereas the mortgage banker makes the loan happen.

A mortgage banker is not a bank and therefore is not required to follow state and federal laws that regulate the banking industry. The mortgage banking industry is generally regulated through the department of banking or real estate, and each state has its own set of laws and regulations to which it must adhere. Many states require that a mortgage banker be licensed in the state that it does business.

A mortgage banker is responsible for finding a source of money, approving the loan for a particular borrower, and finalizing the transaction, which is also referred to as closing the loan. One of the primary advantages of using a mortgage banker over a mortgage broker is that certain fees such as the broker’s fee can be avoided by dealing directly with the source of funding. In this way, a mortgage banker usually helps speed up the process by eliminating the middleman. On the other hand, when dealing with a mortgage banker, the ability to comparison shop is eliminated because mortgage bankers usually only represent one one lender. You can overcome this limitation, however, if you choose to deal with several mortgage bankers at once.

Before you select a mortgage banker you should check with your state’s banking department to see if that banker has received consumer complaints and whether the mortgage banker is properly licensed, if your state requires that. The Better Business Bureau is also a good resource to check for complaints against a mortgage banker.