The Difference Between a Loan Officer and a Mortgage Broker
What is the difference between a loan officer and a mortgage broker? A loan officer is simply a mortgage sales person who works for a licensed mortgage broker. In many states, a loan officer does not need to be licensed.
A mortgage broker does have to be licensed and can be highly regulated, as far as how and where they conduct their business, and how they advertise. The various states' department of banking also look out for mortgage fraud and crack down when complaints are made. Mortgage brokers must allow their state's department of banking to inspect their books and records during normal business hours. Mortgage brokers also sometimes have to have specific net worth requirements, and need adequate capital for office expenses and marketing.
As a loan officer, you will usually be paid up to 50% of the net fees collected on a loan. The fees usually come from the up-front and back-end points that are charged on a loan. The up-front points are paid separately by someone buying a home, or on a refinance they can be included in the new loan amount. If included in the new loan amount, they do become a part of the new loan balance and must eventually be paid back. Back-end points are paid courtesy of the lender, and are funded from an interest rate that is higher than the broker's wholesale rate, or "par" rate. These points are not paid back directly by the borrower. For example, if a loan is for $200,000 and there are 2 points in the back, the mortgage broker is getting $4000 from the lender. The borrower can sell the home or refi the loan at any time and not owe this $4000. The interest rate premiums are priced much like insurance rates are. The lenders know how long the average loan stay on their books, so they know how much, on average, they will get in extra interest to cover the back end points paid to a mortgage broker.
One advantage to becoming a loan officer is that you can work flexible hours, and not all of them in the office. You can be out meeting with bankers, contractors, or other referral sources. You can be hanging up fliers or meeting with prospects. You can take calls on your cell phone, or get online apps from a website. In many cases, loan officers can work from home, depending on what the broker needs as far as phone coverage.