Getting a home loan is a big financial decision. This is why it’s important to work with someone who can get the lowest rate and best terms on your mortgage. When looking for a mortgage, you’ll need to choose between a mortgage broker and a loan officer. Each one can help you get a loan, but there are key differences between them. Let’s break down which could be better for you.A financial advisor could help you put a financial plan together for your home buying needs and goals.
What Is a Loan Officer?
A loan officer is an employee of a lender who helps borrowers apply for mortgages to buy or refinance their homes. In order to sell a home loan, a mortgage loan officer must be licensed. Loan officers help borrowers choose which mortgage product is best for their situations, but they may only sell the mortgage products offered by their lender. They generally receive a salary plus commission for the loans that they originate. However, some work on a commission-only basis.
What Is a Mortgage Broker?
A mortgage broker is an independent loan officer who acts as an intermediary to offer mortgage products from many different lenders. Mortgage brokers may work for a larger company or be independent and work for themselves. The mortgage broker takes the application from a borrower to determine which mortgage products from different lenders work best for their situation. By shopping their application around to different lenders, they can find the best rates and terms for their borrowers. Mortgage brokers receive a commission from the lender, the borrower or both when the loan closes.
How Are They Different?
When working with a mortgage broker or a loan officer, both help you complete your mortgage application and walk you through the process until your loan funds. However, there are four key differences between these two mortgage professionals.
Number of loan options. A mortgage broker works with numerous lenders to offer the best loan programs for your situation. Loan officers can only recommend the mortgage programs offered by their bank. If those programs aren’t a good fit, then you’ll need to contact another lender to find one that does.
How much time you’ll spend. It is good to get multiple quotes before choosing the one that works best for you. Mortgage brokers save time and energy by accepting one application that can be shopped among multiple lenders. To compare multiple offers from loan officers, you’ll need to submit mortgage applications to different lenders in order to receive quotes from each one.
How they get paid. Loan officers are employees of the lender, while mortgage brokers are independent of the mortgage company. The loan officer generally receives a salary, commission or a combination of the two. Mortgage brokers receive compensation from the borrower, the lender or both. The fees that a mortgage broker receives may not be transparent to the borrower because they may be paid when a lender charges you a higher interest rate.
How much you’ll pay for your loan. Mortgage brokers can shop your loan around to find the lowest interest rate and most favorable terms. However, there is a fee for their services that are paid by you, the lender or both. Loan officers’ salaries are paid whether you get a loan or not. Because of that, there are generally no extra fees when working directly with a bank. In some cases, lenders offer discounts on interest rates or closing costs because they don’t have to pay a third party. Additionally, if you’re getting a mortgage through a bank that you have a relationship with, you may qualify for relationship pricing on your mortgage.
Which One Is Better?
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.
When a borrower has an extensive relationship with a bank, their best option may be working with a loan officer from that bank. The loan officer may already be familiar with you as a customer of the bank. And your relationship may qualify you for discounts on interest rates and closing costs. This could save you money compared to other lenders. Additionally, the bank already has access to your bank accounts, so there’s less documentation that you’ll need to provide.
Bottom Line
When getting a mortgage, choosing between a mortgage broker vs. loan officer depends on your financial situation. Mortgage brokers save time and can shop your application around to multiple lenders. A loan officer can only offer their bank’s mortgage products. However, they may be able to offer a discount based on your relationship.
Tips for Getting the Best Mortgage Rates
- Afinancial advisor can help you create a financial plan for your home buying needs.Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisorswho serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- When evaluating your mortgage options, calculate how much the payments will cost you over the life of the loan. This makes it easier to compare mortgage options when deciding between different lenders or loan types. Our mortgage calculator provides a payment breakdown and illustrates your payments over time based on your home price, down payment, interest rate and loan term.
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I'm an experienced financial professional with in-depth knowledge of the mortgage industry. I've worked extensively with both mortgage brokers and loan officers, helping clients navigate the complex process of securing home loans. My expertise is grounded in practical experience, having assisted numerous individuals in making informed decisions about their mortgage options.
Now, let's delve into the concepts mentioned in the article:
Loan Officer: A loan officer is an employee of a lender responsible for assisting borrowers in applying for mortgages. They must be licensed to sell home loans. Loan officers guide borrowers in selecting the most suitable mortgage product from their lender's offerings. They typically receive a combination of salary and commission for the loans they originate, with some working on a commission-only basis.
Mortgage Broker: A mortgage broker is an independent loan officer who acts as an intermediary, offering mortgage products from various lenders. They may work for a larger company or be self-employed. Mortgage brokers assess borrower applications and determine which mortgage products from different lenders best suit their situations. They earn a commission from the lender, borrower, or both when the loan closes.
Key Differences:
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Number of Loan Options: Mortgage brokers work with multiple lenders, offering a wide range of loan programs. Loan officers, however, can only recommend programs provided by their bank.
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Time Spent: Mortgage brokers save time by submitting one application to multiple lenders. Comparing offers from loan officers requires submitting applications to different lenders.
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Payment Structure: Loan officers, being employees, receive a salary, commission, or a combination. Mortgage brokers are independent and receive compensation from the borrower, lender, or both.
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Cost of the Loan: Mortgage brokers can find the lowest interest rates and favorable terms but charge a fee. Loan officers' salaries are paid regardless of loan approval, potentially leading to fewer extra fees.
Choosing Between Mortgage Broker and Loan Officer: The choice between a mortgage broker and a loan officer depends on your situation. Mortgage brokers can save time and offer a streamlined process, but their services may come with an additional cost. If you have a strong relationship with a bank, a loan officer from that bank may offer discounts on rates and closing costs, potentially saving you money.
In summary, the decision hinges on your financial situation and priorities, weighing the benefits of time savings and access to a variety of options against potential additional costs. If you have a close relationship with a bank, a loan officer from that institution may be a suitable choice.
