Finance
In Michigan, a 'mortgage broker' differs from a 'mortgage banker' because:
AA mortgage broker funds loans from their own capital; a mortgage banker does not
BA mortgage broker originates loans and places them with lenders but does not fund from its own capital; a mortgage banker funds loans from its own capital✓ Correct
CThere is no legal difference in Michigan
DMortgage brokers only handle FHA loans
Explanation
A mortgage broker is an intermediary that matches borrowers with lenders but uses the lender's capital to fund loans. A mortgage banker (direct lender) originates and funds loans using its own capital, often selling them on the secondary market.
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Key Terms to Know
Private Mortgage Insurance (PMI)
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
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