What’s the difference between a lender and a mortgage broker? While the nuance may seem small to the average borrower, these terms mean very different things. Firstly, the lender is the party that provides the funds that are borrowed at closing. In exchange, a lien is attached to the property that gives the lender the right to foreclose on the property to collect on the loan if necessary.
Mortgage brokers are not lenders. They are independent businesspeople who look to match borrowers with lenders. They work with many different lenders, giving them access to wholesale mortgage rates and variety of loans for their borrower clients.
Mortgage Loan Officers
Both brokers and lenders employ loan officers to accomplish their daily work. But each loan officer may have an entirely different set of resources based on the type of organization that employs him.
At a brokerage, the mortgage loan officer works to find potential customers and then help them choose from the loans available. Customers have a large pool of loans from which to choose. The brokerage may also help the customer manage any credit problems or other hurdles to securing a loan. Once all of the steps need to qualify and initiate the loan. The customer is then passed to the lender at the time of closing for the loan funding.
At a lender, the loan officer does not perform the marketing functions necessary to finding borrowers. They receive incoming inquiries from potential borrowers and inform borrowers about the different loan products available. Because the lender is a single company, they have fewer loan programs from which to choose.
The lender’s loan officer processes the loan application, but performs fewer functions than a broker in helping consumers overcome credit hurdles. They are sometimes given limited room to change the interest rate in order to qualify customers for a loan.
Reasons to Choose a Mortgage Broker
A mortgage broker offers more help and advice to consumers than a lender. They can shop from a wider array of loans by dealing with many different lenders. Those with poor credit may gain the most benefit from choosing a broker over a lender.
Many lenders will not work with borrowers who have bad, fair and good credit or have trouble fully documenting their assets. They have a rigid framework for borrowers to work within that does not allow for special situations. In addition, the loan officers for lenders are often salaried employees with little interest in whether they are able to close the loan with the borrower or not.
Reasons to Choose a Mortgage Lender
A lender may be best for those with uncomplicated needs and excellent credit. Dealing directly with the lender may speed up the loan process. Some banks offer special terms for customers of the bank.
Trust is another reason to deal directly with a lender. Some brokers are not always ethical in their dealings. There have been some known to offer a lower rate and then switch to a higher rate at closing, when it is too late for a homebuyer to back out. They may not tell the borrower when rates have dropped after the initial application, hoping they will not notice. The broker pockets the additional margin. Others have been known to leave out the mention of certain fees until closing. Make sure that you select a MortgageRefinance.com Mortgage Broker or Lender. Working directly with a MortgageRefinance.com approved mortgage lender minimizes the chances of unethical behavior during the application and closing of the loan.