Mortgage brokers shop your application around to find a mortgage that works best for your financial profile. They typically charge a fee for their services, which may be paid by the borrower or the lender.
Loan officers (also known as LOs) work for a specific institution and offer the loans and mortgage rates offered by their employer. They help borrowers through the mortgage process and are familiar with the rules that govern their institutions.
1. Access to More Loans
Mortgage brokers typically have access to a larger selection of loans than loan officers can. They do this because they work for a mortgage brokerage firm or independently, and so they have relationships with many different lenders.
A broker may also be able to get lenders to waive application, appraisal, origination and other fees that are normally charged by the lender. This can save borrowers thousands of dollars in upfront costs.
When it comes to choosing a mortgage broker, it’s important to consider their retail margin (which includes overhead and marketing/advertising expenses). A low retail margin means the broker can offer a lower interest rate, resulting in a cheaper monthly mortgage payment for the borrower.
A good mortgage broker will also track loan milestones and ensure the borrower meets contract closing dates when purchasing a home. They can also help keep an eye on mortgage rate lock expiration dates to avoid expensive relock or extension fees.
2. Personalized Service
A mortgage broker serves as the intermediary between you and lenders. They work with a stable of lenders and can help you find the right loan for your unique financial circumstances and goals.
A loan officer is an employee of a lending company, bank or other financial institution. They usually specialize in the home loan options available from the company they work for. They can be a good choice for borrowers who want to stay in close contact with the same person throughout the entire process.
However, a loan officer may not be able to make themselves as available as a mortgage broker who works with many clients at one time. For example, some loan officers only have a small team of backup staff, which means you may not be able to reach them outside of business hours.
A mortgage broker, on the other hand, works with several borrowers at once and doesn’t get paid until their loans close, encouraging them to work on a more personal level.
A mortgage broker can give you access to deals and rates not available through your bank. This is because mortgage brokers are not tied to a specific lender. They are independent and have relationships with a wide range of lenders.
A loan officer, on the other hand, is affiliated with a certain institution and can only offer the home loan programs that their employer offers. They may not be able to help you obtain a loan if your needs are outside of the norm.
A mortgage broker also acts as a liaison between you and the lender. They can answer any questions you have and help you fill out the necessary paperwork. Then, they submit your application to the lender for approval.
They can even negotiate with the lender to waive fees like application, appraisal and origination fees that are typically charged by banks. They can also make sure that the loan meets your needs and financial situation.
Whether they receive compensation from the lender or are paid by you, a mortgage broker should be transparent about their fees. The fee structure may be incorporated into the cost of the loan or charged upfront as a lump sum.
Regardless, the fee should be itemized in your application so that you have an accurate picture of costs as you progress through the mortgage process.
Experienced brokers have expert-level negotiating skills regarding fees and terms. If a borrower is turned down by a lender for one reason or another, a broker should make every effort to locate a lender with a more flexible lending policy.
For instance, a borrower with an inconsistent income or a thin credit file might be turned down by a bank for a conventional mortgage. An experienced mortgage broker should know of lenders that offer government-backed mortgages that are more flexible with these types of scenarios. Moreover, the broker should help you navigate the process and remind you of any requirements as you approach closing.