If you are looking for a mortgage, you have two main options for advice. One is a loan officer, the other a mortgage broker.

In some ways, the roles of the two are similar. A loan officer and mortgage broker will ask you questions about your financial situation and help you complete a mortgage application. But in other respects, their roles are very different.

A loan officer works for a bank, credit union, or other mortgage lender and offers mortgage programs and rates only from that institution. A mortgage broker, on the other hand, works on behalf of a borrower to find the lowest mortgage rates available and the best loan programs available from multiple lenders.

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 help borrowers through the mortgage application process. Loan officers are often referred to as mortgage loan officers because they are the most complex and expensive type of loan that most consumers face. Loan officers should have in-depth knowledge of loan products, banking industry rules and regulations, and the documentation required to obtain a loan.

Loan officers know 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 a borrower and loan officer agree to proceed, the loan officer helps prepare the application.

The loan officer then forwards the request to the institution’s underwriter, who assesses the creditworthiness of the potential borrower. If the loan is approved, the loan officer is responsible for preparing the proper documentation and loan closing documents.

Some loan officers are paid by commissions. This commission is a prepaid charge and is often negotiable. Commission fees are generally the highest for mortgages.

What is a Mortgage Broker?

A mortgage broker also collects documents from the borrower and forwards them to a mortgage lender for underwriting and approval. However, mortgage brokers work with a wide variety of financial institutions and can offer you a range of mortgages from different banks, credit unions and other mortgage lenders.

A mortgage broker functions as a matchmaker. They help borrowers connect with lenders and find the best solution based on 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 a lot of money over the life of the loan.

Some lenders work exclusively with mortgage brokers, allowing borrowers to access loans that would otherwise be unavailable to them. Additionally, brokers can get lenders to waive application, appraisal, origination and other fees.

However, the number of lenders a broker can practically access is limited by their approval to work with each lender. This means that borrowers are usually best served by also doing their own legwork in order to find the best deal. Also keep in mind that the major banks work exclusively through their own loan officers and do not waive fees.

Mortgage brokers earn a commission from the borrower, lender, or both at closing. These fees, called origination fees, are based on the size of the loan.

Main differences

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 their employer chooses to offer. Mortgage brokers, who may work within a mortgage brokerage firm or independently, deal with many lenders to find loans for their clients. For this reason, brokers can give you access to a wide selection of loan types.

It can save you a lot of time. Getting pre-approved from different lenders can take hours, and then you have to manage communication with the lender and underwriters to make sure the deal stays on track. A mortgage broker can save you the hassle of managing this process.

However, keep an eye out for additional fees and charges. Since a mortgage broker is not paid by any particular financial institution, they will charge you commission and fees. When you choose a lender, whether through a broker or directly, you can see these fees on the second page of your loan estimate form in the Loan Costs section under “A: Origination Fees “.

Additionally, there may be some advantages to applying for a mortgage directly through a loan officer. Because they’re employed by a mortgage lender, you may get reduced rates and closing costs, you may get an exception for unique incomes and financial situations, and you may have access to more assistance programs down payment (PAD). If you go this route, your approval will also be processed “in-house”, meaning the lender can approve your loan and provide you with money directly.

The essential

In some ways, a loan officer and a mortgage broker perform similar roles. Both will advise you on the type of mortgage that is best for you and help you apply for a mortgage.

There are, however, important differences. A loan officer works for a particular mortgage lender and can only offer loans from that company. A mortgage broker, on the other hand, 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 seek out the best deal. You’ll be paying your mortgage for a long time and it makes sense to get it right.