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Mortgage Broker vs. Loan Officer: What’s the Difference?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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When you’re shopping for a home loan, you may wonder about using a mortgage broker versus a loan officer. While both ask the same questions about your financial situation and help you fill out a loan application, their roles are different.

A loan officer offers mortgage options only from the financial institution they work for, while a mortgage broker acts as a matchmaker between you and a number of different mortgage lenders. Learn the key differences and responsibilities of each type of mortgage professional so you can decide which one you want to work with.

What do mortgage brokers do?

The term “broker” refers to someone who negotiates on someone else’s behalf. A mortgage broker works with many lenders to find you loan programs with the best rates, terms and lowest closing costs for your situation, but the broker doesn’t actually lend you money.

The term mortgage broker is often used interchangeably with “loan officer,” but there are very important differences.

“A mortgage broker is a business entity that originates mortgage loans,” said Rocke Andrews, president of the National Association of Mortgage Brokers (NAMB).

In other words, a mortgage broker is a type of mortgage business, while a loan officer is a salesperson paid to give you the information needed to choose a mortgage that fits your needs. However, a loan officer is also licensed as a mortgage loan originator (MLO), which means they may also work for a mortgage broker, Andrews said.

What do loan officers do?

A loan officer (LO) is usually an employee of an institutional bank, credit union or mortgage lender. They review financial documents and can recommend a loan for preapproval to an underwriter who works for a mortgage bank or lender.

A loan officer originates mortgage loans and there are two types: a licensed professional loan originator and a registered loan originator, Andrews said.

Licensed professional loan originators must take extra education, pass a national test and meet the licensing requirements of the states they do business in. Registered loan originators typically work for federally chartered institutions like banks and don’t have to meet the same education and testing requirements as licensed MLOs.

Loan officers offer only the mortgage products of one financial institution. The lenders they work for lend the money, and you’ll typically make payments to the same company after closing.

Pros and cons of working with a mortgage broker vs. a loan officer

In many ways, a mortgage broker and mortgage loan officer perform the same tasks. They each review your loan application and financial paperwork to make sure you meet the minimum mortgage requirements. Here are benefits and drawbacks worth considering when deciding between a mortgage broker and a loan officer.

Pros and cons of working with a mortgage broker

Pros

Cons

You’ll get rates and fees from multiple lenders.

You have to wait for the lender to make the final approval decision.

You won’t have to do all the mortgage shopping yourself.

You may not be approved for special exceptions for a bad credit history.

You’ll have more loan products to choose from.

You may have limited access to down payment assistance (DPA) programs.

You can switch lenders if your loan is denied.

Your broker doesn’t control the approval process and doesn’t lend you money directly.

Pros and cons of working with a loan officer

Pros

Cons

You may get a break on rates and closing costs, depending on your relationship with your bank.

Your interest rate options are limited to the LO’s financial institution.

Your approval will be handled “in house,” meaning the lender can approve your loan and provide money to you directly.

You’ll have limited choices for loan products offered only by the loan officer’s company.

You may get an exception for unique income and financial situations.

You’ll need to start over with a new lender if you’re denied.

Your bank may be approved for more DPA programs.

You’ll contact several lenders on your own if you want to compare multiple offers.

Is it riskier using a mortgage broker vs. a loan officer?

No. Both mortgage brokers and loan officers are considered mortgage loan originators (MLOs), and have to meet strict federal requirements to be paid for helping negotiate mortgage loans.

To become a licensed MLO, a mortgage broker or loan officer must:

  • Pass an FBI criminal history background check.
  • Provide a credit report.
  • Provide proof of their mortgage loan activity to a national database, such as the Nationwide Multistate Licensing System (NMLS).
  • Pass a national mortgage test.
  • Take 20 hours of education courses.

Mortgage broker fees vs. loan officer fees

Mortgage brokers and mortgage loan officers have to follow strict compensation rules set by the federal Truth in Lending Act. Mortgage brokers can’t make more than 2.75% of the loan amount and must pay all of their costs and loan originator compensation out of that percentage, Andrews said.

Banks can make additional income because it’s not counted as part of the charge, but loan originators can’t make more than 2.75% of the loan amount, Andrews added.

Both mortgage brokers and mortgage banks pay loan officers a fixed percentage of the loan amount, although there may be variations, Andrews said.

To protect consumers, all mortgage loan originator compensation has to meet the following federal guidelines:

  • The pay must be based on a fixed percentage of the loan amount.
  • The compensation cannot be based on charging a higher interest rate or adjusting the terms of the loan.
  • Originators can’t receive a fee for referring a client to a business partner, such as a title company or real estate agent.
  • No mortgage originator may be paid by both the borrower and the lender. It must be one or the other.

Where to find a mortgage broker or loan officer

Ask friends or family who recently bought or refinanced their homes for a referral. Your real estate agent is also a good resource for mortgage broker or loan officer referrals. Use a comparison rate site and review offers from three to five mortgage companies.

You can research the background of a mortgage loan originator through these resources:

  • Nationwide Multistate Licensing System (NMLS). The loan estimates you receive within three business days of your application will include the NMLS “unique identifier” of each loan originator. This number is assigned so consumers, employers and regulators can track a mortgage broker’s or loan officer’s professional status online. Visit the NMLS Access Center to look up any licensed or registered MLO across 59 state and territorial agencies in the United States.
  • Consumer Financial Protection Bureau (CFPB). The CFPB publishes consumer complaints and the company’s response for consumers to review on its consumer complaint database.

By clicking “See Rates”, you will be directed to LendingTree. Based on your creditworthiness, you may be matched with up to five different lenders in our partner network.

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Refinancing With Your Current Mortgage Lender: Is It a Good Idea?

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Should you refinance with your current lender?
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If interest rates are dropping, you’re almost certain to be inundated with flyers and emails urging you to take advantage of refinancing to lower your monthly mortgage payment. Your current lender may be quick to offer you a refinance, sometimes with little paperwork and low closing costs.

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By clicking “See Rates”, you will be directed to LendingTree. Based on your creditworthiness, you may be matched with up to five different lenders in our partner network.

It might be tempting to just work with the company that you’re already making payments for and save some money, but you should definitely shop around to make sure you’re getting your best deal before you refinance with your current lender.

How do I know it’s time to refinance my mortgage?

Before you go looking for a refinance lender, you want to make sure the timing is right. Determining if it’s time to refinance often starts with determining what your financial goal is with the refinance.

If you’re primarily concerned with lowering your monthly payment, the first thing you want to look at is how much you can save. There are also a number of other reasons to refinance, including to take cash out to pay off other debt or to make improvements to your home.

Once you’ve established the reason for your refinance, you’ll want to determine the most cost-effective way to complete the refinance. You obviously start by looking at the interest rate, because that will have the most impact on your monthly payment. However, you also want to look at what it costs you to get that rate.

Looking at the annual percentage rate, or APR, is always a good benchmark to determine the costs associated with a mortgage transaction. Unlike your note rate, the APR reflects the costs of your rate over the life of your loan.

You should always back up your APR comparisons by calculating the breakeven point on each refinance offer you receive. You simply divide your closing costs (not including property taxes and insurance costs) by the amount you’re saving.

The resulting number represents how long it will take you to recoup the costs you spend to complete your refinance. The lower the number of months to recover your costs, the sooner you’ll realize the savings on your refinance, and the better the deal is for your bottom line.

Pros and cons of refinancing a mortgage with your current lender

ProsCons
  • They have your current info and may not require much updated information to finish the refinance
  • Because you’re a current customer, you may have more negotiating power
  • They may offer discounted costs or waive the appraisal fee
  • You may be able to roll over your escrow account into a new account
  • May not be willing to offer as low a rate as what other lenders offer
  • You may end up having to fully qualify if your credit or income has changed
  • May be inflexible if rates continue to drop and you want a lower rate

How to shop for a refinance loan

Not all lenders will be as competitive with a refinance loan, preferring to focus their efforts on people who need mortgages to buy new homes. That’s why it’s important to shop around several different lenders so you know you’re getting your best rate and lowest costs to maximize the benefit of your refinance.

Step 1: Gather basic information you’ll need to start getting quotes

To make sure you get accurate loan estimates, you want to provide the same data to each lender. Here’s a quick overview of what you should have handy:

  • Current mortgage statement: Your current mortgage statement has information about your total current payment, interest rate and even mortgage insurance premiums, property taxes and insurance. This information will allow the lender to provide more accurate cost estimates based on the terms of your current mortgage versus the new one.
  • Date you took out current mortgage: This date is important to determine if you might be eligible for streamline loan programs offered by lenders that require very little documentation, and may not require an appraisal. Government loan programs by the FHA (Federal Housing Administration) and VA (Veterans Affairs) in particular offer streamline refinance programs, and if you’ve had your loan at least seven months, you may be eligible.
  • Estimated FICO Score: If you don’t fill out an online application, you’ll need to make an educated guess about what your credit score is. It’s better to actually have the lenders run your credit to confirm your score — inquiries made on the same day by several lenders only count against your credit as one credit pull, so you don’t have to worry about a sudden drop in your scores.
  • How much your house is worth: One of the best methods for getting a good ballpark on your home’s value is to have the agent who helped you buy your home do a comparative market analysis (CMA). They will look at nearby similar homes that have sold recently (usually within the last 90 days) to determine how much your home might be worth currently. Keep in mind if your home appraisal comes in low, your rate and costs could go up.

Step 2: Compare rates from multiple lenders

Once you have your information together, the best thing to do may be to see what kind of quotes you can get elsewhere. One way to immediately get feedback from several different lenders at once is to use a site like LendingTree, which is MagnifyMoney’s parent company and one of the biggest online marketplaces for different types of loans.

You just answer some questions via an online form, and you’ll be matched with potential lenders who participate in the marketplace. You’ll get quotes by email or phone, giving you a baseline for comparing offers from lenders besides your current one.

You can also call local lenders in your area, or ask for a referral from a friend or family member who recently refinanced.

Step 3: Get all the quotes on the same day

Interest rates fluctuate much like the price of stocks — daily. That’s why it’s important to get all of your quotes on the same day. With an online marketplace, the process is relatively easy, because all of the lenders will usually contact you the same day you make your online inquiry.

If you call around to local lenders, you may or may not get calls back that day. If that’s the case, use the rate quotes you received on the same day for comparison purposes. If you call another lender on a different day, the market may have shifted and you won’t be comparing apples-to-apples price quotes anymore.

Step 4: Take your best quotes to your current lender to see if they’ll negotiate

Once you’ve got your price quotes in hand, take your best of the best to your current lender and see if they’ll compete. Be sure to consider extra flexibilities your current lender gives you, like waiving an appraisal inspection, or allowing you to roll over the balance of your escrow account.

If your current payment includes a portion for your property taxes and insurance, then you have an escrow account. An escrow account is simply a savings account the lender creates to pay your property taxes and insurance when they come due, and is required on loans if you have less than 20% equity in your home.

If you refinance with a lender besides your current lender, you’ll have to set up a new escrow account, and that means extra money out of your pocket at closing. However, you do end up getting a refund of whatever is in your current lender’s escrow account so you often get most if not all of the funds you spend on the new account back.

What if I find a better deal and they won’t match it?

If your current lender won’t match or at least cut some costs to match the rates you’ve provided, then you will likely want to choose the outside lender. Be sure to request a rate lock, and get it in writing before you completely give up on your current lender.

The rate lock period holds the price of your rate for a specified time period, usually 30-60 days, and you’ll need to complete it within that time period for the lender to honor the price.

Final thoughts

The decision to refinance your loan with your current lender may come down to one of convenience rather than economics. If you are at least getting the benefit of some monthly payment savings, and your current lender is offering you a streamlined documentation refinance without an appraisal, it may be worth your time to take the offer, even if the rate is slightly higher than the other lenders you shopped.

If, on the other hand, you want to maximize your savings and don’t mind jumping through the paperwork hoops to prove your creditworthiness to a new lender, then choosing a new lender for your refinance may be your best bet.

By clicking “See Rates”, you will be directed to LendingTree. Based on your creditworthiness, you may be matched with up to five different lenders in our partner network.

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2019 FHA Loan Limits in Wisconsin

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Buying a house in Wisconsin doesn’t just mean settling down in the heart of America’s Dairyland. The Wisconsin housing market has boomed in the past decade, with the volume of sales nearly doubling from 2008 to 2018 and Wisconsin REALTORS® Association data showing a steady increase in median housing prices.

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By clicking “See Rates”, you will be directed to LendingTree. Based on your creditworthiness, you may be matched with up to five different lenders in our partner network.

But don’t be scared off by rising prices! There are dozens of programs out there designed to make homebuying more affordable. Among them are loans backed by the Federal Housing Administration (FHA). In 2018 alone, 1.09% of all the FHA loans used by Americans to buy a house originated in Wisconsin, according to the U.S. Department of Housing and Urban Development (HUD).

And this year, eligible Wisconsin residents have even more money at their fingertips, as FHA loan limits have been raised across the state. In 2019, eligible buyers may be able to borrow anywhere from $314,827 to $368,000 to buy a single-family home, depending on where in the state their dream home is located.

Wisconsin FHA loan limits by county

County NameOne-FamilyTwo-FamilyThree-FamilyFour-FamilyMedian Sale Price
ADAMS$314,827 $403,125 $487,250 $605,525 $67,000
ASHLAND$314,827 $403,125 $487,250 $605,525 $70,000
BARRON$314,827 $403,125 $487,250 $605,525 $120,000
BAYFIELD$314,827 $403,125 $487,250 $605,525 $106,000
BROWN$314,827 $403,125 $487,250 $605,525 $161,000
BUFFALO$314,827 $403,125 $487,250 $605,525 $105,000
BURNETT$314,827 $403,125 $487,250 $605,525 $116,000
CALUMET$314,827 $403,125 $487,250 $605,525 $170,000
CHIPPEWA$314,827 $403,125 $487,250 $605,525 $163,000
CLARK$314,827 $403,125 $487,250 $605,525 $81,000
COLUMBIA$316,250 $404,850 $489,350 $608,150 $275,000
CRAWFORD$314,827 $403,125 $487,250 $605,525 $93,000
DANE$316,250 $404,850 $489,350 $608,150 $275,000
DODGE$314,827 $403,125 $487,250 $605,525 $135,000
DOOR$314,827 $403,125 $487,250 $605,525 $139,000
DOUGLAS$314,827 $403,125 $487,250 $605,525 $152,000
DUNN$314,827 $403,125 $487,250 $605,525 $142,000
EAU CLAIRE$314,827 $403,125 $487,250 $605,525 $163,000
FLORENCE$314,827 $403,125 $487,250 $605,525 $100,000
FOND DU LAC$314,827 $403,125 $487,250 $605,525 $128,000
FOREST$314,827 $403,125 $487,250 $605,525 $55,000
GRANT$314,827 $403,125 $487,250 $605,525 $100,000
GREEN$316,250 $404,850 $489,350 $608,150 $275,000
GREEN LAKE$314,827 $403,125 $487,250 $605,525 $116,000
IOWA$316,250 $404,850 $489,350 $608,150 $275,000
IRON$314,827 $403,125 $487,250 $605,525 $61,000
JACKSON$314,827 $403,125 $487,250 $605,525 $92,000
JEFFERSON$314,827 $403,125 $487,250 $605,525 $180,000
JUNEAU$314,827 $403,125 $487,250 $605,525 $65,000
KENOSHA$368,000 $471,100 $569,450 $707,700 $320,000
KEWAUNEE$314,827 $403,125 $487,250 $605,525 $161,000
LA CROSSE$314,827 $403,125 $487,250 $605,525 $165,000
LAFAYETTE$314,827 $403,125 $487,250 $605,525 $108,000
LANGLADE$314,827 $403,125 $487,250 $605,525 $72,000
LINCOLN$314,827 $403,125 $487,250 $605,525 $94,000
MANITOWOC$314,827 $403,125 $487,250 $605,525 $98,000
MARATHON$314,827 $403,125 $487,250 $605,525 $137,000
MARINETTE$314,827 $403,125 $487,250 $605,525 $106,000
MARQUETTE$314,827 $403,125 $487,250 $605,525 $92,000
MENOMINEE$314,827 $403,125 $487,250 $605,525 $123,000
MILWAUKEE$327,750 $419,550 $507,150 $630,300 $285,000
MONROE$314,827 $403,125 $487,250 $605,525 $125,000
OCONTO$314,827 $403,125 $487,250 $605,525 $161,000
ONEIDA$314,827 $403,125 $487,250 $605,525 $130,000
OUTAGAMIE$314,827 $403,125 $487,250 $605,525 $170,000
OZAUKEE$327,750 $419,550 $507,150 $630,300 $285,000
PEPIN$314,827 $403,125 $487,250 $605,525 $87,000
PIERCE$366,850 $469,600 $567,650 $705,500 $319,000
POLK$314,827 $403,125 $487,250 $605,525 $117,000
PORTAGE$314,827 $403,125 $487,250 $605,525 $147,000
PRICE$314,827 $403,125 $487,250 $605,525 $60,000
RACINE$314,827 $403,125 $487,250 $605,525 $159,000
RICHLAND$314,827 $403,125 $487,250 $605,525 $94,000
ROCK$314,827 $403,125 $487,250 $605,525 $128,000
RUSK$314,827 $403,125 $487,250 $605,525 $73,000
SAUK$314,827 $403,125 $487,250 $605,525 $167,000
SAWYER$314,827 $403,125 $487,250 $605,525 $120,000
SHAWANO$314,827 $403,125 $487,250 $605,525 $123,000
SHEBOYGAN$314,827 $403,125 $487,250 $605,525 $148,000
ST. CROIX$366,850 $469,600 $567,650 $705,500 $319,000
TAYLOR$314,827 $403,125 $487,250 $605,525 $88,000
TREMPEALEAU$314,827 $403,125 $487,250 $605,525 $119,000
VERNON$314,827 $403,125 $487,250 $605,525 $113,000
VILAS$314,827 $403,125 $487,250 $605,525 $145,000
WALWORTH$314,827 $403,125 $487,250 $605,525 $175,000
WASHBURN$314,827 $403,125 $487,250 $605,525 $110,000
WASHINGTON$327,750 $419,550 $507,150 $630,300 $285,000
WAUKESHA$327,750 $419,550 $507,150 $630,300 $285,000
WAUPACA$314,827 $403,125 $487,250 $605,525 $106,000
WAUSHARA$314,827 $403,125 $487,250 $605,525 $115,000
WINNEBAGO$314,827 $403,125 $487,250 $605,525 $142,000
WOOD$314,827 $403,125 $487,250 $605,525 $102,000

How are FHA loan limits set?

FHA loan limits are set by the federal government using median home prices in areas across the country to determine how large (or small) a loan the FHA will back. In places considered “low-cost” by the FHA, the top limit for loans is equal to 65% of the amount Fannie Mae and Freddie Mac will fund for a mortgage on a one-unit property. In places deemed “high-cost,” buyers could be eligible for as much as 150% of what the federal loan programs will allow.

The low-cost area maximum is $314,827 in 2019, and that’s the highest amount applicable for most of Wisconsin this year. Just 11 areas, Columbia, Dane, Green, Iowa, Milwaukee, Pierce, Ozaukee, St. Croix, Washington, Waukesha and Kenosha counties, have higher loan limits, although they all still fall below the maximum for high-cost areas, which tops out nationally at $726,525.

Here are the 2019 standard FHA limits for homes in the U.S.:

  • One-unit: $314,827
  • Two-unit: $403,125
  • Three-unit: $487,250
  • Four-unit: $605,525

Here are the 2019 standard FHA limits for homes in high-cost areas in the U.S.:

  • One-unit: $726,525
  • Two-unit: $930,300
  • Three-unit: $1,124,475
  • Four-unit: $1,397,400

Do you qualify for an FHA loan in Wisconsin?

FHA loans offer a number of benefits, from lower down payments and interest rates to help for folks with less-than-stellar credit. But not everyone qualifies for one of these home financing options, so do your homework before you buy! To start, check to see if your income and credit score might qualify you for an FHA loan.

By clicking “See Rates”, you will be directed to LendingTree. Based on your creditworthiness, you may be matched with up to five different lenders in our partner network.