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Mortgage Brokers, Bankers, or Loan Officers: Know the Differences

When applying for a mortgage loan or mortgage refinance, many people are unable to tell the difference between brokers, bankers, and loan officers. Such differences, however, are important, and may influence the service you’ll get, your costs, and the size of the selection of loan instruments offered.

Before you sign a mortgage application, it may be helpful to understand what kind of professional is serving you and guiding your decisions.

Many people are surprised to find out that loan officers employed by banks are not obliged to hold licenses like those required by mortgage brokers. Moreover, they might be just as astonished to learn that mortgage brokers work as freelance agents, and earn their fees by matching loans to customers.

Loan officers

Loan officers work for banks and credit unions, and provide a complete range of products to meet mortgage expectations based on your credit score and financial aims. Dealing with a loan officer offers the convenience of using your local bank, and may also qualify you for a better interest rate, or terms based on your being a loyal customer.

Mortgage brokers

Mortgage brokers can consider offers from various lending institutions. This provides the most competition from different lenders. They may also offer you a creative loan if you have been rejected by a bank, based on the bank’s own strict rules. Dealing with a broker allows you to shop a wide range of loans not limited to your local area.

Mortgage banks

Finally, there is a third category, the mortgage bank. This is a state-licensed financial institution that has no depositors, and deals only in mortgages. Such bankers are frequently more competitive on origination fees or points paid for lower rates, because they don’t have to share their costs with any “middle men.” However, they may not have access to some of the special low-cost loans provided by banks that can borrow at discounts through the Federal Reserve System.