Homebuyers have a lot of options these days when it comes to financing the real estate purchase. They can go through personal financing, owner financing, a bank or credit union, mortgage broker or loan officer but really what’s the difference and which is best for you?
One of the biggest questions is the difference between a mortgage broker and a loan officer. A lot of times people think they are interchangeable terms but they really aren’t.
Loan officers are typically employed by a lender such as a bank or major credit or lending facility. There typically paid a set salary with potential bonuses for writing loans for that lender.
A mortgage broker typically works with a mortgage brokerage firm or mortgage advisory board or group independently and have access to hundreds of different lenders, banks, credit unions and programs out there. The typically get paid from the lender.
Mortgage brokers can get paid by borrowers or lenders but primarily are lender paid fees. Lender pay compensation plans pay brokers anywhere from .50% to 2.75% of the total loan amount. If borrowers choose to pay the mortgage broker themselves it’s called the borrower paid compensation. This might be less money but you’ll have to pay it right away. Lender paid compensation gets built into the mortgage payment and into closing costs.
Related: Selling options for your home
So is a mortgage broker right for your needs?
The best thing about working with a mortgage broker over a loan officer in a bank or credit union is that a broker has access to hundreds of different loans from dozens of different lenders all across the country. They can search for the best one, the right terms, and the lowest fees and price for you. Each lender offers something a little different so where you might not be able to get the best terms with one lender you will get the best terms with another. They can offer competitive mortgage rates and negotiate terms on your behalf. It might be a little bit more upfront but in the long run, it could save you thousands of dollars.