When you are shopping for a mortgage, there are so many options that it might feel overwhelming. Your choice can have a big impact on how much time you spend shopping for a mortgage and how much you end up paying.
With Rising interest rates and the volatility of the market, it is even more important to understand the options. Let’s take a look at two of them, a Mortgage Broker and a Loan Officer with a retail lender.
Loan officers work for companies such as banks, credit unions or online direct lenders that lend borrowers money to buy and refinance homes. They may be able to offer you several types of loans (Federal Housing Administration (FHA), FHA 203(k), conventional and jumbo) if the financial institution they work for offers them. For specific loan programs, they may also be able to offer you other combinations of interest rates, points, and origination fees.
But, unlike brokers, all of these loans will come through the loan officer’s organization, limiting your options. You’ll need to work with various loan officers at different organizations to acquire quotes from multiple lenders.
A loan officer performs the same duty as a mortgage broker throughout these phases. The main difference between working with a mortgage broker and a loan officer occurs at the beginning when you’re looking for the best mortgage deal.
Mortgage brokers will research mortgages on your behalf. They can save you time and money by searching for the best available rates for someone with your financial profile—assuming they’re knowledgeable and have connections with a variety of mortgage lenders. Also, somewhat confusingly, individuals and companies that fill this role are both called mortgage brokers.
A mortgage broker does not lend money. They will, however, collect information about your income, financial commitments, and credit score in order to determine what types of loans you might be eligible for, and which lenders will offer a loan.
We checked in with Greg Nichols of Nexa Mortgage, one of our “go-to lenders”.
“As a mortgage broker, I am able to save my clients thousands of dollars by cutting out the unnecessary layers of management that retail lenders often have. By being independent and working directly with my clients and lenders, I am able to streamline the process and negotiate better deals. Retail lenders often have numerous layers of management and bureaucracy, which can slow down the process and lead to added fees and expenses. As a broker, I am able to provide a more efficient and cost-effective solution for my clients, resulting in significant savings and a more positive experience overall.” – You can find Greg at the Nichols Mortgage Team at NEXA Mortgage.
How Do I Decide Which Is Best for Me?
The best way to choose between a mortgage broker and a loan officer is to talk to all of them. Many people are intimidated by the unfamiliar mortgage process that they don’t shop around. That’s a huge mistake that can cost you thousands of dollars if not tens of thousands of dollars.
You can and should seek quotes from more than one broker and several loan officers. Set aside one day, or two consecutive days, to gather all your quotes. Market conditions change frequently, as does your credit report. You won’t be able to make accurate comparisons if you get quotes days or weeks apart.
Ask for referrals from friends, family, colleagues, and your real estate agent. You should also check online reviews and prepare to ask several questions before deciding whether to work with them. You may want to ask how much experience they have working with someone like you (e.g., low-down-payment borrower, veteran, small business owner), which lenders they work with (if you’re talking to a broker or banker), how they are compensated, and about their fees.