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When you need to get a mortgage, there are so many options that it might feel overwhelming. Your choice can have a big impact on how much time you spend shopping for a mortgage and how much you end up paying. By learning about the basic differences among three types of mortgage professionals—mortgage brokers, loan officers and mortgage bankers—you can figure out who can save you the most time and money.
Getting a mortgage is one of the biggest financial decisions you’ll make in life. Whether you’re buying your first home or refinancing an existing mortgage, you’ll want to make sure you get the best possible deal. This often comes down to who you choose to work with – a mortgage loan officer or a mortgage broker. But what exactly is the difference, and which is the better option for your individual needs?
An Overview of Mortgage Loan Officers and Mortgage Brokers
A mortgage loan officer works directly for a bank or mortgage lender They can only offer loans and rates from their specific employer Their job is to guide you through the mortgage application process and advise you on the different loan products available from their company.
In contrast, a mortgage broker works independently. They are not employed by any one lender, but rather work with multiple banks and lenders. The mortgage broker will take your application and shop it around to various lenders to try and find you the best possible rates and terms.
Both mortgage loan officers and brokers will help you through the mortgage process from application to closing. But there are some key differences between the two that you need to consider when deciding which option is right for you.
Key Differences Between Mortgage Loan Officers and Brokers
Here are the main differences to understand when weighing up mortgage loan officers vs brokers
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Loan Options – A mortgage broker can access loan options from multiple lenders, while a loan officer can only offer loans from their own employer. This gives brokers an advantage in terms of choice and flexibility.
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Time – Applying with one broker who can shop around on your behalf is much quicker than applying separately to multiple loan officers. This can save you significant time and hassle.
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Payment Structure – Loan officers receive a salary and/or commission from their employer. Mortgage brokers are independent contractors who collect a fee from you and/or the lender. This fee is transparent and disclosed upfront.
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Costs – Mortgage brokers may be able to get you a lower rate by shopping around. But you’ll likely pay an origination fee for their services. Loan officers don’t charge fees, but may not be able to match the lowest rates.
When Is a Mortgage Loan Officer the Better Option?
Despite the limitations on loan options, there are some situations where working directly with a mortgage loan officer makes more sense:
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You already have an established relationship with a particular bank or lender. The loan officer may offer personalized service, discounts, and preferable rates.
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You value simplicity and convenience over finding the absolute lowest rate. Applying directly with one company is straightforward.
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You want to take advantage of special incentive programs only offered to new or existing customers of that lender.
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The particular lender has access to specific mortgage loan programs that meet your needs better than what brokers can find.
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You don’t want to pay any upfront mortgage broker fees. Loan officers don’t charge you directly for their services.
When Is a Mortgage Broker the Better Choice?
Working with a mortgage broker tends to make more sense in these situations:
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You want the widest range of options for loan programs, rates, and terms. Brokers have vast access.
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You have a unique situation that requires a more customized mortgage solution. Brokers can shop until they find it.
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You value expert guidance on finding the ideal loan options among the thousands available. Brokers specialize in this.
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You want your application shopped around to the various lenders vying for your business. This drives better pricing and terms.
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You need speed and efficiency. Letting a broker shop your application around is much faster than doing it yourself.
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You have less-than-perfect credit or a complex financial profile. Brokers can find more lending options.
Questions to Ask When Deciding Between a Mortgage Loan Officer and Broker
When weighing up whether to use a mortgage loan officer or broker, ask yourself these key questions:
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How much do I value having access to the widest range of loan options and lenders?
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Is it worth paying an upfront fee for the broker’s services if they can secure me a lower overall interest rate?
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Do I already have a relationship with a lender that may get me a good deal through their loan officer?
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Do I want the simplest, most streamlined experience even if I lose out on customization or the rock-bottom rate?
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How much time do I have or am I willing to invest to shop around myself?
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How comfortable am I negotiating rates and mortgage terms on my own?
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Does my financial situation require finding a lender who offers more flexible underwriting or unique loan programs?
Tips for Finding the Best Mortgage Rates and Terms
Whether you choose to work with a mortgage loan officer or broker, make sure you follow these tips to secure the best mortgage deal:
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Shop around – Apply with multiple lenders and brokers and compare all the rate and closing cost estimates. Don’t take the first offer.
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Check credentials – Verify any mortgage professional you work with is properly licensed. Brokers should be registered with NMLS.
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Ask about fees – Learn what origination fees or points each lender will charge on your loan upfront before agreeing to work with them.
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Negotiate – Push for discounts on published rates and fees. Even slight reductions can save thousands over your loan term.
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Comparison shop – Leverage competitive loan estimates from other lenders/brokers to negotiate with each one.
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Lock your rate – Once you’ve found the best deal, lock in your interest rate as soon as possible so it doesn’t rise before closing.
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Examine the fine print – Read loan estimates and closing disclosures carefully to avoid any surprises at closing.
The Bottom Line
Choosing between a mortgage loan officer and mortgage broker comes down to your individual needs and priorities. For simplicity and convenience, working directly with a lender’s loan officer may suffice. To access the widest array of options and ultra-competitive pricing, a broker may be the better bet.
Ask yourself the key questions, follow the tips above, and do your research to determine if a mortgage loan officer or broker will get you the ideal loan terms at the best rate for your situation.
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Mortgage brokers will shop around for mortgages on your behalf. They can save you time and money by looking for the best available deals for someone with your financial profile—assuming they’re honest, good at their job and have relationships with lots of different mortgage lenders. Somewhat confusingly, individuals and companies that fill this role are both called mortgage brokers.
A mortgage broker doesn’t lend you money, and they also don’t approve your loan application. However, they will collect information about your income, financial obligations and credit score to see what types of loans you might qualify for and which lenders will offer a loan.
If your finances aren’t strong enough to borrow as much as you want, a broker should be able to tell you what you need to improve on, such as paying down debt to lower your debt-to-income (DTI) ratio or accumulating a longer history of making payments on time to boost your credit score.
If a mortgage broker finds a loan that you want to proceed with, they will be the intermediary between you and the lender. They’ll take your full application, collect your supporting documents and relay any requests for additional information from the lender’s mortgage underwriting department.
Loan officers work for companies such as banks, credit unions or online direct lenders that lend borrowers money to buy and refinance homes. They may be able to offer you several types of loans (Federal Housing Administration (FHA), FHA 203(k), conventional and jumbo) if the financial institution they work for offers them. They may also be able to offer you different combinations of interest rates, points and origination fees on particular loan products.
However, unlike brokers, all of these loans will come only from the loan officer’s company, so your selection will be smaller. To get offers from multiple lenders, you’ll have to work with multiple loan officers at different companies.
If you decide to move forward, a loan officer will take your loan application and submit it to their company’s underwriting department. They’ll be the intermediary between you and the underwriter, and they’ll help you get to closing.
Throughout these steps, a loan officer serves the same function as a mortgage broker. The big difference between working with a mortgage broker vs. a loan officer comes at the beginning, during the shopping phase, where you’re trying to find the best deal on a mortgage.
Mortgage bankers take your loan application, underwrite it, approve it and see you through the closing process. They will either lend you the money directly or get the money from a bank. They can also find you the best deal available from the various banks they have relationships with. As with brokers, a mortgage banker can refer to an individual or a company.
A mortgage banker can originate all types of loans, so you’ll have plenty of options in terms of loan products, just like you would with a mortgage broker or some loan officers. What’s more, they work with all kinds of applicants, including those who need an FHA loan due to its more relaxed qualifications or military service members who want a VA loan.
Mortgage bankers typically have at least 10 years of experience, though this isn’t a firm requirement and licensing regulations vary by state. This level of experience may be helpful if your financial profile doesn’t align with the qualifications for a conventional loan that follows Fannie Mae and Freddie Mac’s lending requirements.
How Do I Decide Which Is Best for Me?
The best way to choose between a mortgage broker, loan officer and mortgage banker is to talk to all of them. Many people are intimidated by the unfamiliar mortgage process that they don’t shop around. That’s a huge mistake that can cost you thousands of dollars, if not tens of thousands of dollars.
You can and should seek quotes from more than one broker, more than one banker and several loan officers. Set aside one day, or two consecutive days, to gather all your quotes. Market conditions change frequently, as does your credit report. You won’t be able to make accurate comparisons if you get quotes days or weeks apart.
By collecting several loan estimates (ideally, at least three to five) for the same mortgage product and loan term, you can directly compare interest rates and fees and see which option will be the most affordable.
That said, if you don’t have a salaried job, a credit score in the 700s and a low debt-to-income ratio, you might save time by skipping the loan officers.
If you are self-employed, retired, using assets rather than income to qualify or in some other outside-the-box category of applicant, you might be better served by a mortgage broker or mortgage banker. They usually have the experience and relationships to quickly match you with the right source of funding and have more options to choose from than loan officers.
Loan Officer vs Mortgage Broker
FAQ
What is the difference between a mortgage broker and a mortgage loan officer?
Is an MLO the same as a broker?
What are the differences between mortgage lenders and mortgage brokers?
What is the difference between a mortgage broker and a mortgage agent?
What is the difference between a broker and a loan officer?
While brokers are independent entities able to work with a variety of lenders, loan officers work directly for a particular mortgage lender. A loan officer is the borrower’s primary contact point if they use a bank, credit union or traditional lender to get a mortgage.
What is a loan officer mortgage broker?
Loan Officer Mortgage brokers are financial professionals who work with a number of lenders to offer a wide range of loan programs to consumers. These brokers match borrowers with specific lenders and loan programs that best meet their needs for a fee or commission.
What is the difference between a mortgage broker and a lender?
In contrast, mortgage brokers work with a range of lenders until they can locate one that offers the most ideal loan program or rates. A declined loan enables them to continue their search. Brokers tend to work more closely with borrowers, providing them access to loans that might not otherwise be available to them.
Is a mortgage broker better than a loan officer?
When comparing a mortgage broker vs. loan officer, the better option depends on your situation. Mortgage brokers can shop your application around to find the best loan program to fit your needs. But, you may have to pay an extra fee for their services. For most people, the time savings and streamlined application process is worth the extra cost.