Mortgage Broker vs. Loan Officer

When you're looking for a home loan, you may work with a loan officer from a bank, or you may choose to work with a mortgage broker. People often confuse the two, and they are different. Although both will produce the same results: a new home loan. However, it is important to understand the difference between the two so you know what to expect from them during the home loan application process.

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

Mortgage brokers are the hub between you and the spokes of hundreds of lending institutions, which can be banks, credit unions, mortgage lenders, finance companies and even individual private investors. A mortgage broker will analyze your financial situation to determine which lender is the best fit for your home loan needs. He or she will submit your mortgage application to one or more mortgage lenders, and works with the chosen lender until the home loan closes. He or she receives a commission from the borrower or the mortgage lender if and when the loan closes.

A bank loan officer is a representative of that lending institution, who works to sell and process home loan products and other products offerred by their employer. They often have a decent variety of home loan products to draw from, but they are expected to sell the products of their employer only. Compared to a broker, one bank will have a very limited assortment of products. Bank Loan officers can be paid a commission or salary for their services.

My experience has been that banks are often better for small loans, under $150,000.00 or so, because the fees that banks charge are often not too high. For larger loans, mortgage brokers are usually better as the better mortgage rates they offer more than make up for the possibility of higher fees.

If your situation is complicated in any way, you stand a much higher chance of success with a broker, as he or she will likely know of a lender that can work with your situation.