Mortgage Lenders
Mortgage lenders generally fall into three basic types, each with its own advantages and disadvantages. The type that you select will depend on your individual needs and preferences. To help you make an informed decision, provided here is a basic guide to the types of mortgage lenders.
Banks/Credit Unions
These are the most traditional types of mortgage lenders, and are often
the first place that prospective borrowers apply for loans. Banks and
credit unions raise money through depositors. The money that is deposited
with the bank or credit union is then loaned to other customers for
mortgages and other loans. Bigger banks and credit unions may also raise
money by selling financial securities.
A major advantage of banks and credit unions is that they often service their own loans. This means that every step of the process, from the mortgage application through the monthly payments, is handled directly through the bank. Many customers like the security of dealing with a local bank branch rather than a faceless company in another state. If this is important to you, be sure to ask, as some banks do outsource some parts of the process.
Banks are free to set their own criteria for mortgages. This can be either good or bad if you have an unusual borrower profile. Your bank may be unable to approve a loan that other mortgage lenders would approve. On the other hand, some banks are more willing to work with unusual profiles, particularly if you are a long-time customer.
Mortgage Brokers
Mortgage brokers act as a middleman between borrowers and lenders. They do
not loan money directly, but take loan applications and shop them around to
various lenders. Established mortgage brokers generally have
well-cultivated relationships with a variety of mortgage lenders.
A major advantage of mortgage brokers is their access to multiple lenders. This flexibility makes it much easier for those with unusual borrower profiles to find a mortgage. They can also offer the mortgage to more than one company, allowing competition to ensure the best terms.
The nature of a mortgage broker allows the company to find competitive rates; while the company's low overhead allows most of the savings to be passed on to the consumer. However, there are unscrupulous mortgage brokers in the business, as is true in any profession. It is important to seek recommendations and search for an honest and ethical mortgage broker.
Mortgage Bankers
Mortgage bankers are lending houses that specialize solely in mortgages.
This focus allows them to offer very competitive loan terms, as well as to
develop creative packages that work well for nonstandard borrowers.
Although mortgage bankers often provide excellent rates, no broker is right for everyone. It is important to shop around for the best price and customer service, rather than settling for the first offer.
The Bottom Line
All three types of mortgage lenders offer their own unique advantages and
disadvantages. Many experts feel that the success of a particular mortgage
agreement largely depends on finding the right relationship with a loan
officer. Keep the advantages of each type of lender in mind, but focus your
search on finding the right loan at the right price, from a loan officer
that you trust.
