When choosing a mortgage professional to work with, you need to decide if you are going to work with a loan officer from a bank or a broker. There are some major differences between the two. Here is some of what sets them apart.

Banks use retail rates, while brokers have access to whole sale rates. Brokers are also working with multiple lenders so they have several whole sale rates to choose from. This means they can find the lowest rate for your situation.

Local retail banks sell only their own loan products. If a bank does not offer a loan program suitable for a borrower in a particular situation, rather than going outside of the bank to find the perfect product, a bank loan officer would try to sell to the client the next best thing. A mortgage broker has much more loan programs to offer. In the same situation, a broker can usually go to other banks and structure a home financing plan short of tailored made for the borrower.

Bank loan officers typically offer programs for "A Credit" borrowers or those with the best credit. Mortgage Brokers have access to hundreds of different programs to fit every credit need.

When you work with a broker, you will find out how much the loan officer is being paid in Yield Spread Premium (YSP). This is something that the lender pays the broker, and the amount that is paid is dependent on your interest rate. A loan officer can raise your interest rate in order to be paid more in YSP from the lender. This allows them to charge you less in fees on the Good Faith Estimate (GFE), and in many cases can save you money.

Bank loan officers are also paid Yield Spread Premium, but they are not required to disclose how much they are making.

Loan officers who work for brokers are often paid as 'independent contractors'. As such, they usually are only paid commission and have the freedom to operate how they want (within reason). One advantage of this is that they may be willing to work in the evenings and on weekends if that is the only time that you are available to meet with them. Sometimes they are even willing to drive to your home to save you time and make the process that much easier for you. This isn't always the case, however, so don't expect it.

 

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