November 22nd, 2021 3:28 PM by Jackie A. Graves
When you need to get a mortgage, there are so many options that it might feel overwhelming. Your choice can have a big impact on how much time you spend shopping for a mortgage and how much you end up paying. By learning about the basic differences among three types of mortgage professionals—mortgage brokers, loan officers and mortgage bankers—you can figure out who can save you the most time and money.
Mortgage brokers will shop around for mortgages on your behalf. They can save you time and money by looking for the best available deals for someone with your financial profile—assuming they’re honest, good at their job and have relationships with lots of different mortgage lenders. Somewhat confusingly, individuals and companies that fill this role are both called mortgage brokers.
A mortgage broker doesn’t lend you money, and they also don’t approve your loan application. However, they will collect information about your income, financial obligations, and credit score to see what types of loans you might qualify for, and which lenders will offer a loan.
If your finances aren’t strong enough to borrow as much as you want, a broker should be able to tell you what you need to improve on, such as paying down debt to lower your debt-to-income (DTI) ratio or accumulating a longer history of making payments on time to boost your credit score.
If a mortgage broker finds a loan that you want to proceed with, they will be the intermediary between you and the lender. They’ll take your full application, collect your supporting documents, and relay any requests for additional information from the lender’s mortgage underwriting department.
Loan officers work for companies such as banks, credit unions or online direct lenders that lend borrowers money to buy and refinance homes. They may be able to offer you several 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, points, and origination fees on particular loan products.
However, unlike brokers, all of these loans will come only from the loan officer’s company, so your selection will be smaller. To get offers from multiple lenders, you’ll have to work with multiple loan officers at different companies.
If you decide to move forward, a loan officer will take your loan application and submit it to their company’s underwriting department. They’ll be the intermediary between you and the underwriter, and they’ll help you get to closing.
Throughout these steps, a loan officer serves the same function as a mortgage broker. The big difference between working with a mortgage broker vs. a loan officer comes at the beginning, during the shopping phase, where you’re trying to find the best deal on a mortgage.
Mortgage bankers take your loan application, underwrite it, approve it, and see you through the closing process. They will either lend you the money directly or get the money from a bank. They can also find you the best deal available from the various banks they have relationships with. As with brokers, a mortgage banker can refer to an individual or a company.
A mortgage banker can originate all types of loans, so you’ll have plenty of options in terms of loan products, just like you would with a mortgage broker or some loan officers. What’s more, they work with all kinds of applicants, including those who need an FHA loan due to its more relaxed qualifications or military service members who want a VA loan.
Mortgage bankers typically have at least 10 years of experience, though this isn’t a firm requirement and licensing regulations vary by state. This level of experience may be helpful if your financial profile doesn’t align with the qualifications for a conventional loan that follows Fannie Mae and Freddie Mac’s lending requirements.
How Do I Decide Which Is Best for Me?
The best way to choose between a mortgage broker, loan officer and mortgage banker is to talk to all of them. Many people are intimidated by the unfamiliar mortgage process that they don’t shop around. That’s a huge mistake that can cost you thousands of dollars, if not tens of thousands of dollars.
You can and should seek quotes from more than one broker, more than one banker and several loan officers. Set aside one day, or two consecutive days, to gather all your quotes. Market conditions change frequently, as does your credit report. You won’t be able to make accurate comparisons if you get quotes days or weeks apart.
By collecting several loan estimates (ideally, at least three to five) for the same mortgage product and loan term, you can directly compare interest rates and fees and see which option will be the most affordable.
That said, if you don’t have a salaried job, a credit score in the 700s and a low debt-to-income ratio, you might save time by skipping the loan officers.
If you are self-employed, retired, using assets rather than income to qualify or in some other outside-the-box category of applicant, you might be better served by a mortgage broker or mortgage banker. They usually have the experience and relationships to quickly match you with the right source of funding and have more options to choose from than loan officers.
How to Find the Right Mortgage Professional
Ask for referrals from friends, family, coworkers and your real estate agent. You should also check online reviews, Better Business Bureau (BBB) complaints and Consumer Financial Protection Bureau (CFPB) complaints.
All three of these mortgage professionals are regulated and licensed. However, if you are working with a loan officer, they may only be registered, not licensed. That doesn’t mean you shouldn’t work with a registered professional; they may be perfectly able to provide what you need.
Either way, you should check their professional qualifications and any regulatory actions that may have been taken against them. Get their Nationwide Multistate Licensing System & Registry (NMLS) number and look it up at the NMLS consumer access website. You can also look them up by name and state.
Ask mortgage professionals several questions before deciding whether to work with them. You may want to ask how much experience they have working with someone like you (e.g., low-down-payment borrower, veteran, small business owner), which lenders they work with (if you’re talking to a broker or banker), how they are compensated and about their fees.
In many cases, your loan will be sold after closing and a different company will become your loan servicer. While you certainly want to receive excellent customer service during the application, underwriting and closing process, don’t choose your mortgage professional based on who you’ll enjoy working with for the next 15 or 30 years. You will likely never talk to them again once your transaction has settled.
Source: Click here