What's the Difference Between a Mortgage Broker, Lender, and Loan Officer?

Though it can be easy to mix them up, each plays a different role in financing your new home. Here’s a simple way to differentiate between the three.

Mortgage concept by money house
Photo: Denphumi/Adobe Stock

Buying a home can be a complicated enough process when you're unfamiliar with who to consult and when. This gets even more complex if you're new to the market where you're planning to settle down. However, as overwhelming as it can be to fund a purchase as big as a new house, there are many people out there who can help. That's why it's important to know about the roles of mortgage brokers, lenders, and loan officers.

While there are overlaps between the three, making the distinction between them is not as daunting as it seems at first glance. The trick is learning what each of them does, how much they cost, and how they can best help you. We asked three real estate agents to explain the role of each expert and why you might need them to guide your next home purchase. Find out the differences between mortgage brokers, lenders, and loan officers so you can be informed when taking your next step.

What is a mortgage broker?

Seeking out the advice of a mortgage broker can help you get a better idea of the different kinds of mortgages available. A mortgage broker is like an intermediary: They assist customers in the search to find the best lender.

Samantha Odo is a licensed real estate expert at Precondo. She describes a mortgage broker as cupid. They help "connect borrowers with loan officers and extend the line to an appropriate mortgage lender." A mortgage broker might ask questions about your financial situation, such as your credit score and desired interest rate. They might also help you fill out mortgage applications. Based on the information you provide, they will recommend a loan officer and/or lenders who would lend to a buyer with your credit and income profile.

A mortgage broker does not actually lend you any money, nor will they approve your loan application. Rather, they help you find a lender who will. And before you make the final decision between multiple available lenders, the broker will help you calculate and compare the long-term costs associated with different loan types and terms.

How and why should I get a mortgage broker?

"The best part of going for a mortgage broker is that they present you with the best deals available out there, which saves a great deal of time and money," says Vicky Noufal, an owner and associate broker at Platinum Group Real Estate.

Using a mortgage broker may save you the time of searching independently. Many brokers work on commission earnings based on the size of the loan, but these costs might be worthwhile for people with complicated financing or debt history, who might not easily qualify for loans at their desired price point.

What is a lender?

A lender is "a group or individual or a financial institution that is ready to make the required funds available to a business or person, with expectations that it will be repaid," says Noufal. There are various names for lenders depending on how they acquire their clients and what they do with your loan after it is funded.

In most cases, Americans will seek a bank or credit union to serve as their mortgage lender. According to Dawn Templeton, a designated broker and owner at Templeton Real Estate Group, most people can obtain financing to purchase a home by directly contacting an institutional lender. There's no need for a middleman, such as a mortgage broker. In fact, some banks and credit unions don't work with mortgage brokers and prefer to talk with potential borrowers directly.

That said, lenders come in all varieties. Some are institutions like banks and credit unions, but they can also be wealthy individuals who finance private mortgages or even a group of crowdsourced lenders.

By definition, lenders are the ones putting up the money to provide financial support to a client, who has agreed to pay back the loan within an agreed-upon time period and at a mutually determined rate of interest.

How and why should I get a lender?

Unless you have cash to purchase your home, you'll need to find a lender of some sort. It may seem tricky to find the best lender since rates can change daily, but check websites like Bankrate.com and Nerdwallet.com to find all available options. These days, online banks (banks that do not have a physical location), are often some of the most affordable rates on the market.

What is a loan officer?

When you call a bank or credit union to apply for a loan, provide supporting documents, or determine if you pre-qualify, you will talk to a loan officer. "Loan officers serve a particular institution and offer available loans and mortgage rates of that financial institution. They sell products offered by their employer," explains Templeton.

"They offer several kinds of loans, including the Federal Housing Administration (FHA), conventional loans, jumbo loans, and more," says Noufal. "However, it depends on what the financial institution that they work for allows them to sell."

Loan officers help clients with the application process and are familiar with the loans offered by their financial institutions. Unlike mortgage brokers, these individuals do not compare options between institutions. Instead, they focus on helping borrowers find a loan product that they qualify for and can afford. They also know the banking industry's rules and how these rules will be applied to each loan application.

How and why should I get a loan officer?

Chances are, if you decide to go with a bank as your lender, then you'll be assigned a loan officer. This person is paid by the institution to help you gather all the necessary documents and proof required to not only qualify for the loan but to actually receive it. Many people get pre-qualified for a mortgage loan months and even years before they close on a new home. In the interim, their finances change in ways that may jeopardize their ability to truly receive the loan. Loan officers can be advocates and educators for borrowers, but that's because their goals are aligned. They want to successfully close on a loan because that's when they can collect commissions.

Remember, each loan officer works for one specific institution. So if you're shopping around for a mortgage, you will interact with multiple loan officers. But it may be possible to shift to a new loan officer at the same financial institution if the one you're initially assigned isn't responsive or has an abrasive bedside manner.

In conclusion, Templeton explains that "mortgage brokers, lenders, and loan officers all three have the same end goal. They all help people to obtain real estate financing so that their real estate purchases become easier and smoother." Many people only need the latter two to successfully secure financing. But if time is of the essence, others may use all three professionals together to find the best mortgage at the best available rate. There are many to choose from, so always interview multiple people and go with people you trust. After all, buying a home is a long-term commitment, and well-established relationships now will likely endure throughout the life of your loan.

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