When applying for a mortgage loan or mortgage refinance, many consumers don't distinguish between brokers, bankers, and loan officers. But the differences are significant, and can affect the service you get, your costs, and the size of the selection of loan instruments offered to you.

Before signing your mortgage application, it may help to understand what type of professional is serving you and guiding your decisions.

Many consumers, for example, are surprised to learn that loan officers working for banks don't have to hold licenses like those required by mortgage brokers. But they might be just as astonished to discover that mortgage brokers work as freelance agents, and earn their fees by matching loans to customers. In most cases, the bigger, riskier, and more expensive the loan, the higher the commission that the broker will pocket.

That's not to say that bankers are better than brokers, or that brokers have more expertise than a credit union loan officer. But there are differences, and they're important for the consumer to know.

A closer comparison may help to clarify practical distinctions, and may assist you when you're looking for a specific type of loan or service.

Loan officers

Loan officers are employed by banks and credit unions, and offer a full range of products to meet mortgage needs based on your credit rating and financial goals. Dealing with a loan officer offers the convenience of using your local bank, and may also qualify you for a better interest rate, or terms based on your being a loyal customer.

Mortgage brokers

Mortgage brokers can consider offers from many different lending institutions. This provides the most competition from different lenders. They may also find you a creative loan if you have been turned down by a bank, based on the bank's own strict guidelines. Using a broker lets you shop a wide variety of loans not limited to your locale.

Mortgage banks

Last but not least is a third category, the mortgage bank. This is a state-licensed financial institution that has no depositors, and deals only in mortgages. These bankers are often more competitive on origination fees or points paid for lower rates, because they don't have to split their costs with any "middle men." But they may not have access to some of the special low-cost loans offered by banks that can borrow at discounts through the Federal Reserve System.

Wherever you shop for a loan as a retail consumer, look for benefits involving price, customer service, and the right type of mortgage for your particular needs. Keep your eye on those benefits, and the process will likely yield the desired results with the level of expert help and advice you want and deserve.