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Mortgage broker vs. loan officer vs. mortgage banker.

When you want to get a mortgage, there are so many options that you may feel overwhelmed. Your choice can have a big impact on how much time you spend looking for a mortgage and how much you end up paying. Learning about the basic differences between the three types of mortgage advisors - mortgage brokers, loan officers and mortgage bankers - can help you figure out who can save you the most time and money.


Mortgage brokers

Mortgage brokers search for mortgages on your behalf. They can save you time and money by searching for the best deals available for someone with your financial profile - provided they are honest, good at their job and have relationships with many different mortgage lenders. Somewhat confusingly, both individuals and companies who fill this role are called mortgage brokers.


A mortgage broker does not lend you money, nor does he approve your loan application. He does, however, gather information about your income, financial obligations and credit score to find out what types of loans you qualify for and which lenders offer a loan.


If your finances are not strong enough to borrow as much money as you'd like, a broker can tell you what you need to improve, such as reducing debt to lower your debt-to-income (DTI) ratio or building a longer payment history to improve your credit score.


When a mortgage broker finds a loan you want to close, he will mediate between you and the lender. He or she will take your completed application, gather your supporting documents, and forward any requests for additional information to the lender's mortgage review department.


Loan Officer

Loan officers work for companies such as banks, credit unions or online direct lenders that loan borrowers money to purchase and refinance homes. They may offer you different types of loans (Federal Housing Administration (FHA), FHA 203(k), conventional and jumbo) if the financial institution they work for offers them. They may also be able to offer you different combinations of interest rates, rates, and origination fees for certain loan products.


However, unlike brokers, all of these loans come only from the loan officer's company, so the selection will be smaller. To get quotes from multiple lenders, you will need to work with multiple loan officers in different companies.


When you decide to apply for a loan, a loan officer will take your loan application and forward it to his company's underwriting department. He or she is the intermediary between you and the underwriter and assists you in closing.


In all of these steps, a loan officer performs the same function as a mortgage broker. The big difference between working with a mortgage broker and a loan officer is at the beginning, in the shopping phase, when you are trying to find the best deal on a mortgage.


Mortgage Banker

Mortgage bankers receive your loan application, review it, approve it and guide you through the process. They will either lend you the money directly or get it from a bank. They can also get you the best deal available from the various banks they work with. As with brokers, a mortgage banker can refer to an individual or a company.


A mortgage banker is able to originate all types of loans, so you have many options when it comes to loan products, just like with a mortgage broker or some loan officers. In addition, they work with all types of applicants, including those who need an FHA loan because the qualifications are looser, or military members who want a VA loan.


Mortgage bankers typically have at least 10 years of experience, although this isn't a firm requirement and licensing requirements vary by state. This experience can be helpful if your financial profile doesn't match the qualifications for a conventional loan that meets the lending requirements of Fannie Mae and Freddie Mac.


How do I decide which loan is best for me?

Talking to each of them is the best method to decide between a mortgage broker, loan officer, and mortgage banker. Many people are intimidated by the unfamiliar mortgage process and don't look around. This is a big mistake that can cost you thousands of dollars, if not tens of thousands of dollars.


You can and should get quotes from more than one broker, more than one bank and multiple loan officers. Take a day or two in a row to get all the quotes.Your credit report and the state of the market both fluctuate often. If you receive quotes several days or weeks apart, it will be impossible to make an appropriate comparison.


If you obtain multiple quotes (ideally at least three to five) for the same mortgage product and term, you can directly compare interest rates and fees and determine which option is the most affordable.


However, if you don't have a steady job, a credit score in the 700s and a low debt-to-income ratio, you can save time by skipping the loan officers.


If you're self-employed, retired, qualify with assets rather than income, or are in another category of applicant that doesn't fall into the category, you may be better off with a mortgage broker or mortgage banker. They usually have the experience and relationships to quickly match you with the right funding source and have more options to choose from than loan officers.


Here's how to find the right mortgage broker

Ask friends, relatives, colleagues and your real estate agent for recommendations. You should also check online reviews, complaints with the Better Business Bureau (BBB) and complaints with the Consumer Financial Protection Bureau (CFPB).


All three mortgage providers are regulated and licensed. However, if you're working with a loan officer, they may only be registered and not licensed. That doesn't mean you shouldn't work with a registered professional; they may well be able to provide what you need.


In any case, you should verify professional qualifications and any regulatory action taken against them. Get the Nationwide Multistate Licensing System & Registry (NMLS) number and check the NMLS website for consumer access. You can also search for them by name and state.


Ask mortgage professionals several questions before you decide to work with them. You should ask how much experience they've working with people like you (e.g., low down payment borrowers, veterans, small business owners), what lenders they work with (if you're talking to a broker or banker), how they're compensated, and what their fees are.


In many cases, your loan will be sold after closing and another company will become your loan servicer. Even if you want excellent customer service during the application, underwriting and closing of your loan, you shouldn't choose your mortgage servicer based on who you'll enjoy working with for the next 15 or 30 years. You'll likely never speak to him again after your transaction is complete.

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