“What is the difference between a loan officer, a mortgage broker, and the underwriter? Are they ever the same person? Do they all work for the same company?”
We first received this question from a reader over 10 years ago, and we’ve since revised this page to make it more informative. And judging by traffic numbers alone, this is a very common question among first-time home buyers and borrowers.
So let’s waste no time and dive right in, starting with the short version:
- A mortgage broker works like an intermediary between a borrower and multiple lenders, brokering the deal and finding the best loan option.
- A loan officer usually works for a single bank or lender and often serves as point of contact for the borrower, guiding them through the process.
- The underwriter works behind the scenes, performing due diligence to ensure that the borrower, the house, and the paperwork meet all applicable requirements.
Those are the basics. Below, you’ll find a more comprehensive explanation on the difference between mortgage brokers, loan officers, and underwriters.
Broker: A Middleman Between Lenders and Borrowers
When shopping for a mortgage loan, you can go straight to a direct mortgage lender and apply with them, or you could work with a broker who deals with multiple lenders.
Definition: A mortgage broker is an intermediary or go-between who connects borrowers with lenders offering various loan products. Brokers facilitate the process by evaluating the borrower’s financial situation and goals, and then shopping for loan options that might be a good fit. A good mortgage broker will also try to secure the most favorable terms and rates for their clients.
Four important points to know about mortgage brokers:
- Acts as an intermediary between borrowers and various lenders, helping borrowers find the most suitable loan terms and products.
- Often has access to a wide range of lenders and loan options, offering borrowers more choices and more flexibility.
- Facilitates the mortgage process by gathering necessary documentation and submitting loan applications to lenders on behalf of borrowers.
- Mortgage brokers can either be paid by the lender or the home buyer / borrower. Commission fees can range from 0.5% to 2.75% of the base loan amount.
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).
The broker will then shop around with different lenders to see what each lender is willing to offer, in terms of the interest rate and loan terms. Brokers often maintain product sheets for each of the lenders they work with, detailing their loan offerings and specific requirements.
Advantage of Working With a Broker
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 for borrowers who are otherwise well qualified.
But you don’t have to use a mortgage broker when shopping for a home loan. You can get quotes directly from the lender—or better yet, from a handful of lenders. You can compare offers based on their interest rates, annual percentage rate (APR), fees, and estimated closing costs.
Also keep in mind that mortgage brokers usually charge a commission fee for their services, which can range from 0.5% to 2.75% of the principal loan amount. You might have to pay this extra fee (as part of your closing costs) unless the lender covers it. Find out up front who pays the broker’s commission.
Loan Officer: A Bank or Mortgage Company Employee
If you go directly to a bank, credit union or mortgage company to apply for a home loan, you’ll most likely be working with a loan officer.
This person will serve as your primary point of contact throughout the process, guiding the loan forward from application to closing. But unlike a broker, a loan officer can only offer the products and programs available from the one financial institution they work for.
Definition: A loan officer is a professional employed by a financial institution or lender who assists borrowers in obtaining mortgage loans. They serve as the main point of contact for borrowers throughout the process, providing guidance on available loan products, terms, and requirements. Loan officers help borrowers complete applications, gather necessary documents, and facilitate communication between borrowers and underwriters.
Four important points to know about loan officers:
- Typically employed by a single financial institution or lender.
- Can only offer mortgage products or programs from that one financial institution.
- Serves as the primary point of contact for borrowers during the loan application process.
- Assists borrowers in completing loan applications and coordinates with underwriters to ensure timely processing.
- Paid by the bank or lender they work for, in most cases.
The main difference between a loan officer and a mortgage broker is that the L.O. can only offer you access to the loan products offered by their employer. A broker, on the other hand, can offer you access to multiple lenders and more loan options.
The mortgage loan officer works for the bank or lender that is actually 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.”
Underwriter: A Behind-the-Scenes Risk Assessor
Borrowers usually have less interaction with mortgage underwriters (when compared to the brokers and loan officers that serve as primary points of contact). Unlike a mortgage broker or loan officer, an underwriter typically works “behind the scenes” in a risk-assessment capacity.
Definition: An underwriter is an individual who works for a bank or lender and evaluates the risk associated with a mortgage loan. They review the borrower’s financial information, credit history, and property appraisal to determine eligibility for financing. Underwriters ensure that the loan application adheres to regulatory requirements and lender guidelines. They usually make the final decision on whether to approve or deny a loan.
Four important points to know about mortgage underwriters:
- Works on behalf of the lender, evaluating the risk associated with approving a mortgage loan.
- Gets paid by the lender or financial institution they work for, in a typical home loan scenario.
- Ensures that the loan application meets all regulatory requirements and lender guidelines.
- Underwriters can either approve the loan for closing (known as “clear to close”), request additional information from the borrower, or reject the loan for not meeting pre-established guidelines.
The mortgage underwriter is responsible for reviewing all documents and qualification criteria, to make sure the loan is sound.
But there’s a chance you won’t ever speak to the underwriter directly. If he or she raises a red flag on the file, for whatever reason, the issue might be passed along to the broker or loan officer (who is still your primary point of contact at this stage). They will work with you to resolve whatever issues the underwriter has brought up.
A Mini-Glossary of Related Terms
We’ve offered some definitions for the mortgage broker, loan officer and underwriter above. Here are some additional terms you might encounter during the loan process, particularly when dealing with one of these three individuals.
- Application: A formal request submitted by a borrower to a lender for a mortgage loan. Both mortgage brokers and loan officers assist borrowers in completing the application process.
- Closing Costs: Fees and expenses associated with finalizing a mortgage loan, including appraisal fees, title insurance, attorney fees, and loan origination fees.
- Commission: A fee paid to a mortgage broker or loan officer for facilitating the mortgage loan process and securing a loan for the borrower.
- Conditions: Requirements or stipulations issued by underwriters that must be satisfied before final loan approval. Brokers and loan officers typically work with borrowers to help resolve these conditions.
- Credit Union: A financial institution owned and operated by its members, offering financial services including home loans.
- Direct Lender: A financial institution or mortgage company that originates and funds mortgage loans directly to borrowers without using intermediaries like brokers. Loan officers often work for direct lenders.
- Mortgage: A loan secured by real estate, typically used to purchase a home.
- Origination: The process of initiating and completing a new mortgage loan application, including application, processing, and underwriting. Loan officers guide borrowers through the origination process.
- Origination Fee: A fee charged by lenders for processing a new mortgage loan application. It covers the administrative costs associated with underwriting and processing the loan.
- Principal: The original amount of money borrowed in a home loan, excluding interest and other charges.
- Underwriting: The process of evaluating a borrower’s creditworthiness and the risk associated with approving a mortgage loan.
Note: This is a basic overview of the primary differences between mortgage brokers, loan officers, and underwriters. This information is intended for a general audience and might not apply to your particular situation. When applying for a home loan, find out who you are dealing with, what they do, and how they get paid.
Brandon Cornett
Brandon Cornett is a veteran real estate market analyst, reporter, and creator of the Home Buying Institute. He has been covering the U.S. real estate market for more than 15 years. About the author