When searching for a mortgage you have two options when it comes to getting a professional to help secure funding: a loan officer or a mortgage broker. Roles of loan officers and mortgage brokers are similar in that they will both gather information about your financial picture and help you fill out a mortgage application and get it processed. But they are different in other ways.
A mortgage broker is an independent loan officer and works on a borrower’s behalf to find the lowest available mortgage rates and best loan programs through multiple lenders based on your income and credit profile. By shopping the application around to different lenders they can find the best rates and terms for borrowers. They collect your relevant documents and forward to the mortgage lender for approval and underwriting. However, there is a fee for their services that are paid by the buyer, the lender, or both. These fees may not be transparent to borrowers because the lender may just charge a higher interest rate, or the fee will be paid at closing. Not all banks work with mortgage brokers which means you could miss out on some funding options. Mortgage brokers don’t lend money, but help connect you to a lender that will, and mortgage brokers do not service the loan.
A loan officer works for a bank, credit union, or mortgage lender and offers programs and mortgage rates from their financial institution only. They must be licensed and have a comprehensive knowledge of banking industry rules and regulations, and generally receive a salary plus commission for the loans they originate. The approval and underwriting process is completed “in house” as opposed to a third party.
There are generally no extra fees when working with a bank directly. Sometimes lenders offer discounts on intertest rates or closing costs because they don’t have to pay a third party. Also, if you are getting a mortgage through a bank that you already have a relationship with, you may qualify for relationship pricing on the loan. Loan officers and mortgage banks are direct lenders and generally service the loans they originate.
Another thing to consider when deciding on a mortgage lender is partnering with a LO or MB who is local versus an online lender. Local lenders know their markets and will be able to counsel you on different lending options based on what is happening in that particular market. Local lenders are generally more responsive in answering your questions and getting your mortgage pre-approval ready, and their reputation as a local trusted lender will instill confidence to the selling agent of the property you are bidding on. We partner with Guaranteed Rate Affinity – local experts who have their fingers on the pulse of our market. Contact me for more information or go to Www.Grarate.Com/timmartin to connect with Tim Martin of Guaranteed Rate. He is happy to speak with prospective home buyers about financing options and understands the market.
Whatever you decide, it’s important to use a responsive lender or broker that is available to answer your questions, give sound counsel on how much home you can afford, and explain the financing options available to you. Regardless of your preferred partner, there are benefits to them being local and knowledgeable in the market you are looking to purchase. It’s in your best interest to do some research before choosing how you will finance your new home. It’s most likely going to be the largest investment you’ll make in your lifetime.