What's the difference between a Mortgage Loan Officer and a Mortgage Broker?

When you’re ready to begin the homebuying process in earnest, your first step should be to speak to a reputable Mortgage Loan Officer and a Mortgage Broker. That’s why this post is dedicated to educating you on the major differences between these two types of mortgage professionals.

What’s a Mortgage Loan Officer?

A mortgage loan officer works for an organization such as a bank, credit union, or other type of lender. He (or she) sells mortgages that originate at his lending institution. The lender often offers many types of loans, all of which are originated from the organization itself. The loan officer will work with you to facilitate all aspects of the lending process, including pre-approving you for a mortgage and processing your mortgage application. If it’s approved, your loan officer will work directly with you to complete your home mortgage purchase.

A loan officer working directly with a lender is only able to access the loans and interest rates available through his institution. If you have a relationship with the lender, you may be in a better position to negotiate loan terms that are acceptable to you.

What’s a Mortgage Broker?

A mortgage broker works for an organization or on his (or her) own. Rather than acting as the loan originator, a mortgage broker shops mortgages on your behalf from dozens or even hundreds of lenders representing a wide cross-section of the lending community. Trained to assess not only the type of loan that would suit your situation best but also the type of lender that would be the best fit for you, a mortgage broker has many connections through which he or she can find the specific loan package most appropriate for your situation. To do this, your mortgage broker analyzes your credit and financial background and helps you complete your homebuyer’s application. He then submits the package to several lenders in order to sell your loan.

Your broker works on commission and will be paid a percentage (usually 1% to 2%) of the final loan’s value. Whether you pay the fee or your lender does depends on how you negotiate the terms of your loan.

Though the broker isn’t paid by you, a reputable one will put you first, and not try to sell you on a loan that doesn’t work for you or try to talk to you into one that has unfavorable terms, especially if you have good or excellent credit. A good broker will also take the time to educate you on how to get your finances in order prior to completing the application, as well as counsel you on how much to put down and what type of loan to take out.

Your broker will be facilitating all aspects of the loan process with the lender on your behalf, so you’ll spend less hands-on time on the process than you would if you worked directly with a lender.

A Mortgage Loan Officer and a Mortgage Broker? Which is Better?

The right mortgage professional for you depends on your specific situation. Read on to help you decide which type of mortgage professional may be the best fit for you.

Choosing to Work with a Mortgage Loan Officer

In general, you might choose to work with a mortgage loan officer if:

• You already have a relationship with that professional and/or the institution for whom he or she works
• You have very good to excellent credit and your home buying situation is a relatively straightforward one (e.g., you have 20% to put down and the home you want to buy has no major issues that may make a lender balk)
• You don’t want to want to have to worry about potentially paying a mortgage broker’s fees

If you work directly with a lender, you should not simply use one known to you or the first one that offers you acceptable terms. Instead, you should contact at least three lenders and determine which one can best meet your needs and offer you the most desirable terms. If you’re thinking this could prove time-consuming, you’d be right. The process can be laborious and difficult to navigate. You may eventually end up scrapping the idea and contacting a broker instead. However, some people prefer the ability to work directly with a lender, and for these individuals who meet the above criteria, a loan officer may be able to best meet your needs.

Choosing to Work with a Mortgage Broker

On the other hand, you might choose to work with a mortgage broker if the following is true for you:

• You have a more complicated buying situation, such as having less than excellent credit or less than 20% to put down, wanting to buy a home that needs significant work, or wanting access to special loan programs.
• You want advice on how to get your credit or finances in order in a way that will make you most attractive to potential lenders
• You don’t have a relationship with a specific lender that can easily meet your needs, and/or you want to quickly and easily find out what all your loan options are
• You don’t have a ton of time or financial savvy that would allow you to negotiate the complexities of the loan-negotiation process yourself
• You want access to up to hundreds of lenders, rather than just a few, in order to ensure you’re getting the best possible loan terms
• You want someone who can give you all the time and attention you need in order to fully explain the process and go through all of your options

Make Your Move

We hope you now have a better understanding of the difference between a mortgage loan officer and a mortgage broker. If you’ve decided that working with a mortgage broker is your best option, you should know that all mortgage brokers are not created equal. Here at Villa Nova Financing Group, we work in lockstep with you from your first point of contact to not only ensure you get the most advantageous loan for your situation now, but that both that your loan and your finances are carefully structured to bring you greater financial freedom and peace of mind well into the future.

Ready to buy your next home? Give us a call at Villa Nova Financing Group today!