There are many different people involved in the process when you take out a mortgage to buy a home. Each person that you deal with along the way will provide an important service as you work your way down the road toward becoming a homeowner.
Here’s a summary of who’s who in the mortgage business and what they will do for you.
Once you decide to apply for a mortgage loan, you can contact a mortgage broker or visit one or more lenders (such as a bank or a credit union). If you go directly to a lender, you will speak to a loan officer. A loan officer is someone who works for the lender.
Your loan officer will assist you in figuring out how much you can afford to spend on a mortgage loan so that you choose the best one for you. The loan officer will also help you fill out your mortgage loan application and monitor the loan approval process.
You should be aware that a loan officer specializes only in the individual loans that are available at the lender he or she works for, not all available loans on the market.
A mortgage broker is similar to a loan officer in that he or she can assist you in finding the best loan option for you. The major difference between a loan officer and a broker is that brokers don’t work for a specific bank or lender. A mortgage broker works with many lending institutions to try to find the best lender and mortgage for your particular situation.
However, the broker won’t look at every available mortgage on the market. Instead he or she will usually just find you the best option from a lender that he or she has a relationship with. (Learn more in How to Choose and Work With a Mortgage Broker.)
A loan processor works for the lender (that is, the party that lends you the money) and collects the documents needed for your mortgage loan application. He or she prepares and organizes the application for presentation to a mortgage underwriter. The loan processor makes sure that the proper documentation is included and that all calculations are correct.
Once the loan processor finishes getting your application and all supporting documents together, your file will be sent for underwriting. The underwriter also works for the lender.
An underwriter's main job is to assess the risk that you will default on the loan. (Defaulting on a loan means failing to live up to your end of the deal. For example, homeowners “default” on a mortgage when they fall behind in payments.) The mortgage underwriter will review various factors, such as your income, credit history, debt, and savings to determine if you qualify for a particular loan. The underwriter then decides to approve or deny your loan request.
There may be one underwriter or a team of underwriters that review your application to determine if meets the loan program guidelines. (There are also automated underwriting systems that assess your risk based on a formula and give an approval or denial based on the data entered into the computer system.)
The lender is the financial institution that provides the funds for your mortgage loan. States have their own systems for licensing and regulating residential mortgage lenders.
After you have successfully obtained a mortgage and become a homeowner, you'll work with a servicer -- that is, a company that manages your mortgage loan account. The mortgage servicer handles tasks such as:
Sometimes the servicer is the lender itself (or the subsequent owner of the loan, if the lender sells your loan). Other times, the servicing is contracted to a third-party. The third-party servicer might then hire another company (called a subservicer) to perform the servicing duties.
It is common for a lender to transfer the servicing of your loan to a different company after you take out the mortgage. You will be notified if and when your mortgage servicer ever changes. (Learn more in What Happens If My Mortgage Servicer Changes?)
Mortgage lenders often sell the loans that they originate, in order to bring in income so that they can turn around and make more loans. A mortgage investor is the party that purchases home loans originated by mortgage lenders.
Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation), for example, are investors that buy mortgages from lenders on the secondary market. (Learn more in What Are Fannie Mae and Freddie Mac?)
Now that you know the major players in a mortgage transaction, hopefully the process will flow as smoothly as possible when you take out a loan to buy a home.
If you want to learn more about the mortgage business, see Nolo’s Getting a Mortgage area.