Mortgage Broker vs. Loan Officer

When you're looking to get a mortgage loan, you may work with a loan officer or you may choose to work with a mortgage broker.  People often confuse the two job types even though both will glean the same results: a new home. However, it is important to understand the difference between the two types of jobs so you know what to expect from them during the mortgage application process.

A mortgage broker is an individual or firm that acts as an independent agent for both the borrower and the lender of a mortgage loan.

Mortgage brokers are the middle man between you and the lending institution, which can be a bank, trust company, credit union, mortgage corporation, finance company or even an individual private investor. A mortgage broker will analyze your financial situation to determine which lender is the best fit for your loan needs. He or she will submit your mortgage application to one or more lenders in order to sell it, and works with the chosen lender until the loan closes. He or she receives a commission from the borrower if the loan closes. The closing costs with a mortgage broker can range and the fees on the "Good Faith Estimate" are generally descretionary.

A loan officer is a representative of a lending institution, such as a bank, who works to sell and process mortgages and other loans originated by their employer. They often have a wide variety of loans types to draw from most of which originate from that specific lender. Also known as a loan representative or account executive, loan officers represent the borrower to the lending institution and will guide him or her through the selection, processing and closing of mortgage loan. Loan officers can be paid a commission or salary for their services.  Occasionally, the borrower has a specific situation in their credit or finance profile which inhibits the loan officer from placing the loan with his or her own lending institution or it may be that at the time of rate lock another lenders rates are superior.    In this instance the loan officer can ("Broker") the loan meaning, use a lender that is best suited to meet customers needs.  There are times when there are small fixed costs associated with brokering the loan as a lender.  These costs must be weighed by looking at the total cost of the loan transaction using the "Truth In Lending" Document.  The "APR" is the only TRUE way to compare similar mortgatges including fees.

The other major difference is lenders are regulated an monitored by the Federal Government.  Loan officers are typically w-2 employees of the bank or lending institution and have to complete and maintain a riggorous training schedule for Equal Housing Lending laws, Federal Labor Laws, Federal and State Compliance Laws, Anti coersion laws, and a host of others.  This provides the consumer with re-course in the event of a misunderstanding involving a loan file.  Recently there has been a rash of new legislature sent to congress regarding unethical lending practices in the mortgage community.  This does not mean a mortgage broker cannot provide a quality product and service, it just means extra effort should be taken in determining who you will decide to work with whether broker or banker.

We would be happy to help weigh the benefits of both options.