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A mortgage broker is a loan officer who doesn’t work for a single direct lender. “Often, they will have a number of lenders and investors that they work with, making it possible for them to find the best possible loan combination for your situtation. 

Lenders vs. Brokers vs. Loan Officers

People new to home buying sometimes confuse the terminology. Here’s an easy way to remember the difference between lenders, brokers and loan officers.

  • The lender is the institution, such as a bank or credit union,  providing the loan. 

  • A loan officer, also called a mortgage loan originator, is the person who will work with you on the application to secure the loan. MLOs usually work exclusively for one lender.

  • A mortgage broker is a type of loan officer who typically works with multiple lenders rather than for one bank or credit union to find you the best loan for your needs.

Another key difference to consider is that a mortgage broker will work with you throughout the entire loan process, but the broker is done once the loan closes. If you work with a loan officer, that person can be a future point of contact should you have a question. Your loan officer can sometimes get a better answer quicker.

How Do Mortgage Brokers Get Paid?

“Brokers generally work for themselves or have a corporation that they work with.  They get paid by the client, a borrower or buyer usually,  once the transaction is completed.  Sometimes they work with multiple companies. 

Mortgage broker fees must be disclosed upfront and are typically 1% to 2% of the loan. In some cases, though, the lender might pay the broker’s fee. When the borrower pays, the fees can be rolled into the loan amount. When the lender pays, the broker’s commissions are typically built into the cost of the loan.

Pros of Using a Mortgage Broker

  • Working with a broker lets you outsource some home loan comparison research. Instead of having to call or request online quotes from multiple lenders yourself, a broker can present you with several options. 

  • Some lenders only work via brokers, so you may find the broker can offer a program that wouldn’t be available to you otherwise. 

  • A broker may be able to help you find nontraditional home loans if your fiscal situation is unique, such as self-employment income or mediocre credit. 

  • Seasoned brokers might have better leverage with some lenders they work with to reduce or waive fees, which can save hundreds or even thousands of dollars.

  • A good broker will walk you through the home buying process.

Cons of Using a Mortgage Broker

  • It can be a significant additional loan cost rolled into your loan.

  • A broker might not have as much negotiating power as you might with a lender with which you have an existing relationship.

  • Some brokers could favor working with certain lenders, leaving out others that may offer you a better deal.

  • Because not all lenders work with mortgage brokers, you may not have access to certain loan programs.

  • There’s no guarantee that a broker can find you the best deal.

Is a Mortgage Broker Right for You?

Mortgage brokers can be an excellent resource for some home buyers, but everyone’s situation is different. Executive Home Loan, inc has a excellent record of personalized attention and best possible loans that you can qualify for.

If you’re on the fence, of course, check out a few other brokers as well as lender of your research. See how their programs are and see how their rates and pricing compare. There are so many nuanced programs out there, so it’s hard to have an idea of what’s best given someone’s circumstances.