Mortgage Broker vs. Loan Officer

When you're looking to get a mortgage loan, you may work with a loan officer or you may choose to work with a mortgage broker.  People often confuse the two job types even though both will glean the same results: a new home. However, it is important to understand the difference between the two types of jobs so you know what to expect from them during the mortgage application process.

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

Mortgage brokers deliver your loan to one of many possible lending institutions, which can be a bank, trust company, credit union, mortgage corporation, finance company or even an individual private investor.  A mortgage broker will analyze your financial situation to determine which lender is the best fit for your loan needs. Because the broker has access to numerous lending institutions and all of the programs each offers, they will have a much wider selection of loan programs from which to meet your needs.  He or she will submit your mortgage application to one or more lenders in order to sell it, and works with the chosen lender until the loan closes. He or she receives a commission from either the borrower, the lender, or a combination of the two if the loan closes.

A loan officer is a representative of a lending institution, such as a bank, who works to sell and process mortgages and other loans originated by their employer. They often have a variety of loans types to draw from, but all originate from that specific lender.  As such, the loan programs they have to choose from will be limited to what that lender offers.

Also known as a loan representative or account executive, loan officers represent the borrower to the lending institution and will guide him or her through the selection, processing and closing of mortgage loan. Loan officers can be paid a commission or salary for their services.

One misconception that borrowers sometimes have is that if they "eliminate the middleman", or mortgage broker, that they will save money in closing costs or get a better interest rate.  However, that is usually not the case.  Mortgage brokers are offered wholesale pricing by the lenders who wish to purchase the loans brokers originate.  Many of the same lenders or banks you can go directly to for your mortgage loan offer substantially better terms to mortgage brokers.  Because of the wholesale pricing mortgage brokers receive and the ability to shop among many lenders for the same program you will usually get lower rates and fees from a mortgage broker.