Know the difference: Mortgage brokers vs. lenders
Quick insights
- Mortgage brokers act as intermediates between lenders and borrowers, representing the borrower’s interests.
- Brokers can help borrowers compare multiple loan options, apply for mortgages and act as advocates in negotiations.
- Brokers are different from loan officers, who typically represent a specific financial institution or loan provider.
If you’re exploring your options for a home loan, you may be wondering what the difference is between a mortgage broker and mortgage lender. Mortgage lenders and mortgage brokers are not the same thing, and although they may work together, they serve different purposes. Understanding the difference can help make your home-buying process easier. In this article, we’ll explain how each entity works and describe their role in the homebuying process.
What is a mortgage lender?
A mortgage lender is the entity that directly funds a home loan. Types of lenders typically include banks, credit unions, non-bank financial institutions and online direct lenders. A lender evaluates your application, makes a decision and funds a home purchase upon approval. It’s the lender’s name that will appear on your monthly mortgage payments in the repayment phase.
What is a mortgage broker?
Sifting through various lenders and applying for potentially multiple preapprovals can be a heavy task for homebuyers to tackle on their own. A broker acts as an intermediary between the mortgage lenders and borrowers, while also providing one-on-one attention and buyer education along the way. Homebuyers who want personalized guidance, assistance with comparison shopping and application support may choose to work with a mortgage broker.
With the help of a mortgage broker, you may be able to access premium rates that are not accessible if you went to the same lender directly. This is because lenders could strike deals with brokers to bring in business in exchange for better rates.
Loan officer vs. mortgage broker
A loan officer is a representative of the lender and serves to facilitate the loan application. When you decide to pursue a home loan independently, the officer is who you’d interact with throughout much of the process. Unlike a mortgage broker, who can act as your advocate and discuss your loan options with multiple providers, a loan officer represents the lender and the lender’s interests. This person can only discuss loan products offered by their employer.
Deciding between mortgage brokers and lenders
Depending on your preferences, you can choose to work with a mortgage broker or directly with a lender (a loan officer). Each stage of your homebuying experience will likely vary depending on the party you work with. Here’s a closer look.
Stage 1: Choosing a loan
If you decide to apply for a loan independently, you can research multiple companies and compare their rates, loan terms and reputation. When working with an experienced broker, they can help assess your needs and work on finding the right loan for you. Plus, because brokers work with many lenders, this person can often source a wider variety of loan types. The loan officer for a lender can only provide the products that the lender offers.
Stage 2: Applying for a loan
When applying directly with a lender, you will have to navigate their application process yourself—completing forms, collecting documents and deciphering the fine print. A loan officer can answer questions and guide you through the application process, but their main role is to provide information, rather than personalized advice. When working with a broker, you can rely on their expertise when you apply for a loan. That can extend to filling out forms, gathering documents and answering your questions with your interests in mind.
Stage 3: Mortgage negotiations
After the application is submitted, brokers keep an eye on the progress for their clients and provide updates along the way. Depending on the outcome of the application, a broker may also negotiate the loan rate and terms with the loan officer on the client’s behalf.
Stage 4: Closing and post-closing
A broker can help ensure that you are prepared for closing day, including seeing to it that all paperwork is complete, and the funds are dispersed. Brokers tend to build their businesses on positive relationships and might want to keep in touch with clients up to and beyond closing. A broker may be able to offer guidance relating to managing your mortgage throughout its life, including future refinances.
In conclusion
Working with a mortgage lender is one way to approach the home loan process. For many homebuyers, the broker-buyer relationship provides an efficient way to compare multiple loan options at once. For others, including those who prefer to be more hands-on, a broker may feel like an unnecessary middle person. If you’re curious about your loan options with Chase, consider reaching out to one of our Home Lending Advisors for a one-on-one conversation.
