Reader question: “My best friend and I are both in the market to buy homes. She is ahead of me in the process and has already been talking to lenders, submitting applications, etc. She has described all of the paperwork that goes back and forth between the loan officer, the mortgage broker, and the underwriting people. It sound like a lot of red tape and is very confusing to say the least. What is the difference between a loan officer, broker and underwriter? Are they ever the same person? Do they all work for the same company?”
Great question! A lot of borrowers are confused by the relationship (and differences) between mortgage brokers, loan officers and underwriters. So you’re certainly not alone. Here are the key differences between these three individuals:
Let’s start with the definition of a mortgage broker. This individual doesn’t always work for the lender. In fact, they might work with a handful of different mortgage companies, or even dozens of them. That’s one of the key benefits they offer.
The broker is basically a matchmaker between the borrower and the lender. They interview borrowers to find out what kind of loan they are looking for, and what their qualifications are (credit score, down payment and such). Then they shop around with different lenders to see what they are willing to offer, in terms of the interest rate and loan terms.
One of the advantages of using a mortgage broker is that you can gain access to multiple lenders at once, and have a larger pool of offers to choose from. This can be particularly useful for borrowers who are only marginally qualified for a loan. For instance, if you have a weak credit score, the broker might know of a particular lender that allows lower scores (as long as the borrower checks out in other areas).
Of course, you don’t have to use a mortgage broker. You can get quotes directly from the lender — or better yet, a handful of lenders. You can compare offers based on their interest rates and estimated closing costs.
There are pros and cons to using a mortgage broker. The primary advantage is that you gain quick access to a broad group of lenders (ideally, anyway). The primary disadvantage is that you’ll probably have to pay their fee, unless the bank picks it up. So it could add to your closing costs in the end. You should always ask who pays the broker’s fee up front.
The mortgage loan officer (MLO) actually works for the bank, lender, or financial institution that is funding the loan. According to the U.S. Department of Labor: “Most loan officers are employed by commercial banks, credit unions, mortgage companies, and related financial institutions.”
This person originates the loan and all of the paperwork that goes with it — and there is a lot of paperwork these days. The MLO prepares the applicant’s file so that it can be sent to the underwriter down the line. Once the broker helps you find a lender, he or she will basically fade from the picture. Your new point of contact would be the loan officer, who will steer your file through the rest of the process.
The mortgage broker makes a match between borrower and lender, and then hands you off to the MLO for further processing. Eventually, your file will reach the next person in the chain — the underwriter.
The mortgage underwriter is responsible for reviewing all documents and qualification criteria, to make sure the loan is sound. There’s a chance you won’t ever speak to the underwriter. If he or she raises a red flag on the file, for whatever reason, the issue will be passed along to the loan officer (who is still your primary point of contact at this stage). The MLO will then work with the borrower to resolve whatever issues the underwriter has brought up.
Check out our guide to the underwriting process, if you want to learn more about what takes place.
This is just a basic overview of who these people are, and what they do. But it should help you understand the primary differences between mortgage brokers, loan officers and underwriters. If you have any follow-up questions about their roles and responsibilities, feel free to post them.