If you are looking for a mortgage, you have two main options when it comes to getting advice. One is a loan officer and the other is a mortgage broker.
In some ways, the roles of both are similar. The loan officer and mortgage broker will ask you questions about your financial situation and help you fill out a mortgage application. But in other respects, their roles are very different.
The loan officer works for a bank, credit union, or other mortgage lender, and only offers mortgage programs and rates from that institution. In contrast, the mortgage broker works on behalf of the borrower to find the lowest mortgage rates available and the best loan programs available through multiple lenders.
- Both loan officers and mortgage brokers inquire about your financial situation and help you complete a mortgage application. However, their roles differ in other respects.
- Loan officers work for mortgage lenders such as banks or other financial institutions.
- Mortgage brokers match borrowers with lenders and try to find what best suits the borrower’s needs.
- Be aware of the fees and commissions associated with any of the professionals.
What is a loan officer?
A loan officer works for a mortgage lender — a bank, credit union, or other financial institution — and their job is to assist borrowers in the mortgage application process. Loan officers are often called mortgage loan officers, since this is the most complex and expensive type of loan most consumers encounter. Loan administrators must have a thorough knowledge of lending products, banking industry rules and regulations, and the documents required to obtain a loan.
Loan officers are familiar with all the different types of loans offered by the financial institutions they represent and can advise borrowers on the best options for their needs. Once the borrower and loan officer agree to proceed, the loan officer helps prepare the application.
The loan officer then passes the application to the institution’s guarantor, who assesses the creditworthiness of the potential borrower. If the loan is approved, the loan officer is responsible for preparing the appropriate documentation and loan closing documents.
Some loan officers are compensated through commissions. This commission is a prepaid fee and is often negotiable. Commission fees are usually the highest for mortgage loans.
Usually loan officers work for only one financial institution and can only provide loans from the employer. They may be able to lower your rates and fees, but your options are limited to one company.
Who is a mortgage broker?
The mortgage broker also collects papers from the borrower and passes those papers on to the mortgage lender for underwriting and approval purposes. However, mortgage brokers work with a wide range of financial institutions and can offer you a range of mortgage loans from various banks, credit unions and other mortgage lenders.
A mortgage broker works like a matchmaker. It helps borrowers to connect with lenders and find the best fit for them in terms of the borrower’s financial situation and interest rate needs. A mortgage broker can save the borrower time and effort during the application process, and potentially save a lot of money over the life of the loan.
Some lenders work exclusively with mortgage brokers, providing borrowers with access to loans that would not otherwise be available to them. Additionally, brokers can persuade lenders to waive application, evaluation, incorporation, and other fees.
However, the number of lenders that a broker can access in practice is limited by their agreement to work with each lender. This means that the best service for the borrowers is to do some of their own legal work as well in order to find the best deal. Also keep in mind that major banks operate exclusively through their own loan officers, and do not waive fees.
Mortgage brokers receive a commission from the borrower, lender, or both at closing. These commissions, known as set-up fees, depend on the size of the loan.
A mortgage broker can save you time and effort during the application process, and potentially save you a lot of money over the course of the mortgage term. However, you should still shop around to get the best deal.
In principle, working with a mortgage broker can save you a lot of time and money. Loan officers can only help you apply for the types of loans your employer chooses to provide. Mortgage brokers, who can work for a mortgage brokerage firm or independently, deal with several lenders to find loans for their clients. For this reason, brokers can give you access to a wide range of loan types.
This can save you a lot of time. It can take hours to apply for pre-approval with different lenders, after which you have to deal with communication with the lender and underwriters to ensure the transaction stays on track. A mortgage broker can save you the trouble of managing this process.
However, stay alert for additional fees and costs. Since the mortgage broker is not paid by a particular financial institution, they will charge you a commission and fees. When choosing a lender – whether through an intermediary or directly – you can view these fees on the second page of your loan estimation form in the Loan costs section under A: Construction Fees.
Additionally, there can be some advantages to applying for a mortgage directly through a loan officer. Since they are employed by a mortgage lender, you may get a break in rates and closing costs, you may get an exception for unique income and financial situations, and you may have access to more Down Payment Assistance (DPA) programs. If you go this route, your approval will also be handled “internally”, meaning the lender can approve your loan and provide the money directly to you.
Is the loan officer a mortgage broker?
No. Often, homebuyers do not understand the difference between a mortgage broker and a loan officer. The loan officer works directly for one of the lenders while the broker is an independent party that works for no one but themselves and their clients.
Is it dangerous to use a mortgage broker versus a loan officer?
No, both mortgage brokers and loan officers are mortgage loan originators (MLOs), and they must meet strict federal requirements to be paid to help negotiate mortgage loans.
Why use a mortgage broker on the bank?
Since mortgage brokers work with many lenders, including major banks, small lenders, insurance and credit companies, and private funds, they often have access to mortgages at better rates.
In some ways, a loan officer and a mortgage broker perform similar roles. They will both tell you what type of mortgage loan is best for you, and both will help you apply for a mortgage.
However, there are important differences. The loan officer works for a certain mortgage lender and can only provide loans from that company. In contrast, a mortgage broker has access to a wide range of loan options.
Whichever professional you choose to work with, be sure to pay close attention to the fees and commissions associated with your mortgage, and shop for the best deal. You’ll pay off your mortgage for a long time, and it makes sense to get it right.