This is a great question!

Simply put, a Mortgage Banker lends their own money to you to purchase a home. A Mortgage Broker works with many different lenders to find the money for you to purchase a home.

Here are the book definitions:

Mortgage broker: One who, for a fee, brings together a borrower and lender, and handles the necessary applications for the borrower to obtain a loan against real property by giving a mortgage or deed of trust as security. Also called a loan broker.

Mortgage Banker: A company providing mortgage financing with its own funds. These funds are usually borrowed and the financing is either short term or, if long term, the mortgages are sold to investors within a short time.

There are advantages to both. A Mortgage Banker, since they are lending their own money, MIGHT be able to get you better terms or lend you money if you've got marginal credit. Might is the key word. You'll need to shop around if that's what you need.

And shopping around is exactly what a mortgage broker does. They work with multiple lenders, so often they are able to find the best terms and conditions. Many brokers (and bankers) specialize in areas such as "sub-prime" loans (think marginal credit) or second mortgages, commercial lending, etc.

Just remember, the promise to get you the lowest rate isn't the only thing that makes for a good loan/lender. Your lender can promise you zero interest, but if they can't fund the loan, it does you zero good. That 5% loan may sound better than a 6% loan, but after paying points, fees and who know what else, is it really a better deal?

The best thing to look for in a mortgage banker or broker is just what you look for in any service person--somone who is professional, who will work hard for you and knows what they are doing. That holds true for lenders, real estate agents and the paper boy.