Loan Officer or Mortgage Broker
What's the Difference When You're Looking for a Mortgage?
Jul 24, 2007
When the possibility of purchasing a property is on the table, besides working with a realtor to find the “right” home, you also begin the process of figuring out how to pay for it. Deciding how, where, when, and with whom to apply for a mortgage can be one of the most puzzling questions to resolve. Basically, the mortgage market breaks in two ways: bank lending officers and mortgage brokers (Online lenders are usually mortgage brokers – the Internet is just the main way they market their business).
What’s the difference?
Bank Loan Officers:
The loan officers at a bank, credit union or other lending institution are employees whose job it is to sell and process mortgages and other loans that the bank/credit union might make to individuals or companies. While they usually have a wide variety of loan products to draw from in order to meet a given client’s needs – and credit rating – all of these products originate from the lending institution. Although a bank/credit union may ( or may not) later sell these loans to a consolidator for servicing, the original money is coming from the lending institution and the loan must conform to that institution’s guidelines. Among the pros of going with your local bank is the convenience of the process, the possibility that your loan may be later serviced locally and the local institution’s knowledge of the local housing market. You can sometimes also get better interest rates and terms when you are able to secure a mortgage with you rlocal bank or credit union. Among the cons of going with a bank’s officer is the fact that the loan products they offer – and the credit and applicant guidelines they must follow – are limited to what the lending institution has in place.
Mortgage Brokers:
Mortgage brokers are freelance agents, not employees of any lending institution. As such, they are professionals who are paid a fee to match a loan with a customer. Typically, they work with dozens – even hundreds – of loan products and are not tied into either the products or the lending policies of any one institution. They are typically able to find mortgages for clients who might not qualify for a given bank’s products, especially where credit is an issue. The trade-off is that hard to place loans usually have higher interest rates. Among the pros of going with a mortgage broker is the wide range of loan products they typically offer, giving you the possibility of getting a better deal than you could get at any single bank. Among the cons is the amount of time that can be required to actually sell and process your application, especially when your credit is not perfect. Also, if you are dealing with a mortgage broker not located in your local area, they may be unfamiliar with the local housing market and with other factors typical to your area, like water supplies, septic tanks and local building or zoning codes, any of which could cause problems down the road.
Credit Reports:
It’s a good idea to pull your own credit reports from the three major credit agencies before you go looking for a mortgage. While whomever you eventually deal with is still going to want an official copy of their own, it will save time and aggravation when you’re shopping for the best mortgage.
