Loan Officer vs. Mortgage Broker vs. Online Lender
When you’re considering buying a house, you already have so many questions to answer. Is this neighborhood really up-and-coming? Is the bathroom big enough, or will we be at each other’s throats? Can we look past the basement tiki-bar? You have to make decisions on an almost hourly basis.
One decision that you may not have put much thought into is who are you going to get your mortgage from. But this is one more choice that you should make carefully.
There are different types of lenders and financial institutions that offer financing for a home purchase, and each has their pros and cons. Depending on what you’re looking for and your financial situation, one of these options could be a better fit for you.
A loan officer, often called an LO, usually works for an institutional bank, credit union or an independent mortgage lender, like Guaranteed Rate. A loan officer’s main responsibility is to originate loans, which is another way to say provide a buyer with a mortgage loan.
Hands-on, and always available
Loan officers work closely with a buyer, and often their real estate agent, to understand what the buyer is looking for—both in their home and their finances. Then they recommend a loan product that will match what the buyer is looking for.
They’re job doesn’t end there, however. A loan officer does much more than offer you financing options. They will also review your financial documents and can coordinate with an underwriter in their institution to get you preapproved for a loan, which gives you a leg up when you find the home you’re looking for.
Plus, a loan officer at lender like Guaranteed Rate can work closely with a specialized team to make the mortgage application process as smooth and quick as possible. And some make themselves available outside of normal business hours to answer any questions or help you get your loan closed.
Backed by their institution
One of the most prominent aspects of a Loan Officer is that he or she will usually only offer mortgage options from the financial institution where they are employed. For some loan officers, this gives them fewer options, but with some institutions this isn’t a concern, as they have a wide variety of loan options to offer their clients.
LOs are also able to handle unique income situations, like if you’re self-employed or retired. They can work with you to gain access to down-payment assistance (DPA) programs that may be available to you that can help with the initial costs of buying a home. They can even offer you advice to improve your application.
Pros of working with a Loan Officer
- Personally handles the approval of your loan, examining your financial documents and suggesting ways to help the process go more smoothly
- Offers a more hands-on approach to help navigate uncommon financial situations like self-employed, retired, or freelance income
- Has access to down-payment assistance programs
As the word “broker” implies, a mortgage broker is a professional who negotiates mortgage terms on your behalf. A mortgage broker works as an intermediary between many lenders to find options that work for you.1 This could be the best rates, terms or lowest costs and fees associated with closing.
Does the comparison shopping for you
A mortgage broker will discuss with you what you’re looking for in terms of your home and your finances, much like a loan officer. They will then act as a middleman to match you with the best lender that’s offering a loan product that fits your needs. Brokers often work with what is known as “wholesale mortgage companies,” entities which fund mortgages but don’t deal directly with customers.
Mortgage brokers will bring your application to multiple lenders and then will earn a fee or a commission from the bank or lender that ends up funding your loan.
Doesn’t work alongside the people closing your loan
Once you decide which loan and lender is right for you, a mortgage broker should work with the lender’s underwriting department, title company and any other administrative staff to help you close the loan.
Unlike a loan officer, however, the broker doesn’t work for the same company as those people and is only able to do so much to make the process smoother.2 It’s one thing to leave a voicemail to an underwriter with a question about the status of a loan, like a broker, but much more effective to tell someone on your team that the loan needs to be completed today, like an LO.
Pros of working with a Mortgage Broker
- They’ll provide you with loan options from multiple lenders
- They’ll do the comparison shopping for you
- You can more easily switch lenders if for some reasons your first loan is denied
Cons of working with a Mortgage Broker
- He or she cannot make the final decision of if your loan is approved or not
- A broker is not as hands-on with the application and approval process
- You may not have as many DPA programs available to you
- Unable to lend you money directly
Proper Rate uses the first Digital Mortgage, but at this point, many lenders have a high-tech application process that’s fast and efficient. Most of these are backed up by expert loan officers who use the online application to easily gather all of your information, but still work closely with you. That one-on-one service is how they make sure you get the best loan for your needs and can help you navigate any obstacles that may come up.
But other lenders use their online platforms to streamline the whole process, so much so that you may not work directly with a loan officer or broker. In fact, some of the largest mortgage lenders in the country are entirely online and don’t even have a single branch office that you could walk into and talk with an originator.
Pros of working with an Online Lender
- Fast, streamlined service that will speed up the financing process
- Convenience of working online
Cons of working with an Online Lender
- Some of the largest ones don’t have a branch-office where you can meet face-to-face with your originator
Choosing who to work with
While loan officers, mortgage brokers and online lenders all offer essentially the same service, the difference in how they do that can be significant. If your needs are fairly straightforward, then perhaps an online lender could be right for you. If you’d like more expertise and personal attention for your loan, a loan officer or broker could be the way to go.
Buying a home is a big deal—for most people the biggest financial decision of their lives. So it’s important that you feel comfortable with who you are working with and getting your loan from. Because finding the right one will not only give you a chance to save some money, but potentially save you headaches and anxiety as you work your way to the closing table.
1 “Should you use a Mortgage Broker or Bank Loan Officer?” by David Welliver, Moneyunder30.com accessed 4/28/21
2 “Mortgage Broker vs. Loan Officer: What’s the Difference?” by Denny Ceizyk, MagnifyMoney.com Blog accessed 4/28/21
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