Do you know what the difference is between a mortgage broker vs loan officer?
When it comes to investing in a piece of property, the entire process can leave your head spinning – especially if you are a first-time buyer. There are many steps, quite a few different people involved, deadlines to meet, inspections to be done… and the list keeps going. Plus, if you intend to take out a mortgage to purchase the property, how do you know where you turn?
You have to make a choice of whether to use a mortgage broker or loan officer. This is a crucial step in the whole loan process. On the surface, both of these individuals may appear to do the same thing. But a deeper dive will show you that they are, in fact, very different. Let’s take a look.
The role of a mortgage broker is to get you the best loan for your real estate purchase – and that means one that is a perfect fit for you. They have access to loans from many different lenders and, thus, many different loans. They work with banks, credit unions, and other financial institutions/mortgage lenders.
Linking Lenders and Borrowers
In their role, mortgage brokers act as liaisons and bring together the lender and the borrower. These individuals may work for a brokerage firm, or they may work on their own. In other words, when you work with a mortgage broker, you work with a third party. And while this may make you hesitant, it can actually be very beneficial. After all, you will have access to loans from different lenders – which can land you some great deals.
The Power of a Network
What’s more, everyone has a different situation. One borrower may have polished credit, verifiable income, a good debt-to-income ratio (DTI), and even money sitting in the bank for a down payment. Another borrower may have the income and the down payment but not the best credit. And still, another borrower may not have any of these things. But because a mortgage broker has a large network of lenders and familiarity with their requirements, they can save you a lot of time in finding a loan. Filling out loan applications can be very tedious and time-consuming. And going through this process on your own with lenders you aren’t even sure will approve you can be very frustrating.
So, How Do They Get Paid?
Mortgage brokers receive a commission for their services from the borrower or the lender. Sometimes both. The borrower needs a loan, the lender wants more approvable clients, and the broker brings them together for a fee. This commission is referred to as the origination fee, and it is roughly between 1% and 2% of the loan amount. This will be disclosed upfront.
A loan officer works directly for a financial institution and is also referred to as the mortgage lender. You would apply for a mortgage through them, whether a bank, credit union, or online financial institution, and, if approved, be offered any of the products they offer. You won’t have the opportunity to access different products from other lenders with a loan officer because, remember, this person is an employee of one particular finance.
Because you are working with the lender itself, you will be able to develop a relationship with them over time – for as long as you make your mortgage payments. Note that you won’t encounter any brokerage fees since you aren’t working with a broker, but you will still have an origination fee.
Ability to Choose Your Mortgage Company
If you decide to work with a loan officer, then you have control over choosing just what mortgage company you want to work with. While this may seem like the perfect choice, it also means that you will have to go through the entire application process, gathering all the necessary documents needed, without any guarantee of loan approval. And this can be a time-consuming process. If you are only applying for one loan at a time, you may waste a lot of time. Yet, applying for more than one can be overwhelming. It also means more marks on your credit.
Any downfalls with working directly with the lender aren’t because of the loan officer but the overall process itself. Deciding if this is the route for you should be backed with a lot of research before you take the first step.
A mortgage broker does not work for a lender. In fact, they may not work for anyone. These individuals work independently or may work with a mortgage brokerage firm. Mortgage brokers are not stuck working with one lender, which gives them the freedom to find you the best rate amongst a long list of lenders.
A loan officer is someone who works for the lender and can only provide loans through the lender they work for. Depending on your situation and the current market, a loan officer may potentially be able to get you a reduced rate or provide you with down payment assistance programs.
Mortgage Broker vs Loan Officer: What is Right for You?
A home is one of the biggest investments you will make. So, when it comes to a mortgage, you want to make sure you are getting the best deal possible.
So, who do you choose to work with? The answer is quite personal. But by doing your own research on a mortgage broker vs loan officer, you’ll be able to narrow down the best fit.
If you have a relationship with a particular financial institution and you want to stick with them – or apply to – then you may want to contact their loan officer. On the other hand, if this is your first time purchasing real estate, you may find that you don’t know where to turn. You may not understand the process, which lender caters best to your situation, or the documentation needed to make it happen. Or you may even be under time constraints and want to be sure you get the best rate – without wasting precious time. A mortgage broker can guide you through the process and connect you with the lenders that will appeal most to your situation. This may be the best option.
Apply for Mortgages and Loans at Option Funding Inc
Are you looking for mortgage programs or loan options? Contact us today at Option Funding Inc in Westlake Village, California. Branch manager Ahmad Azizi and his team of mortgage brokers and loan officers can help you find the perfect home loan today!