How Do Mortgage Loan Officers Get Paid?
We often hear the phrase, “I’m taking out a loan.” But in reality, you’re buying a loan. It costs money, and there are countless lending professionals looking to sell you their products.
Your mortgage loan officer will play a key role in helping you secure the financing you need to close your home purchase. But who pays the bill for their services? How do loan officers get paid?
In this post, we clarify the who, how, and when of the process. We’ll also share tips to save money and provide a list of questions to ask to ensure you know who’s handling one of the largest loans you’ll ever purchase.
What is a loan officer?
A loan officer is a financial professional employed by a bank, credit union, or other lending institution. Their primary role is to help you find and apply for a mortgage that suits your financial situation. Loan officers guide you through the application process, assess your eligibility, and present loan options that match your needs.
A true loan officer who is not a mortgage broker is usually limited to only offering the loan products their employer provides. Consumers outside the industry may use the term “loan officer” to refer to someone who actually authorizes the loan, but mortgage approvals are usually handled by the underwriter.
What is a mortgage broker?
A mortgage broker serves as an intermediary between you and multiple lenders. Unlike a loan officer who works for one financial institution, a mortgage broker has access to a broader range of loan products from various lenders.
Their job is to shop around on your behalf, comparing loan options to find the best terms and rates for your specific circumstances. They don’t lend money directly but instead connect you with lenders who do. You might compare a broker to a distributor who sells fruit that another company grows.
What is a mortgage lender?
A mortgage lender is a financial institution or entity that provides funds for your home loan. Lenders can be banks, credit unions, or specialized mortgage companies. They are responsible for underwriting your loan, meaning they assess your creditworthiness and decide whether to approve your loan application.
The lender is the source of the money you borrow, and you’ll make your mortgage payments directly to them. While loan officers and mortgage brokers help you navigate the process, the lender is the one who ultimately provides the loan. A mortgage lender might be compared to the farm that produces the fruit.
