The types of mortgage lenders
include mortgage bankers, commercial banks, savings & loans and
credit unions gather funds from their customers through checking and
savings accounts and certificates of deposits. These funds are then
used to make loans. When these institutions make a mortgage loan,
they may decide to hold it in portfolio or sell it to secondary market
Mortgage bankers get their
funds typically by selling their loans in the secondary mortgage market.
Although the loan is sold shortly after funding, mortgage bankers
may not sell the servicing on the loan. Since, mortgage bankers primarily
have one focus of business--to make mortgage loans-- they usually
offer very attractive loan programs and rates.
Mortgage brokers generate
about 50% of all loans. They have access to a variety of lenders and
often offer the most choice in loan programs. Brokers assist the consumer
in completing the application and loan selection process and direct
them to suitable lenders to fund the mortgage. Besides, brokers can
quickly place your loan with another lender if your loan is turned
down. Mortgage brokers are paid a fee by the borrower or the lender
when a loan closes.
It is important to understand
the difference between mortgage lenders and mortgage brokers. As a
rule, mortgage brokers don't make a decision whether to extend you
a loan, and they don't actually makes the loan. They work as intermediaries
between borrowers and lending sources. However this fact does not
mean that you are paying a higher rate. Since mortgage brokers obtain
their funds from a variety of sources, they can even save you money
by shopping your loan.
Mortgage lenders usually
have wholesale and retail departments. Mortgage brokers obtain rates
at wholesale, markup these rates by adding points and then quote you
a retail rate which is what you get when you go directly to a lender.
Mortgage brokers are free to set their own pricing and may markup
wholesale rates differently.
When deciding on a mortgage
broker it is important to choose one that shops rates with a large
number of lenders, has a fair markup and good service.
Regardless of what type
of institution you do business with, it's important to make certain
it has no complaints registered with state or federal regulators or
the Better Business Bureau. Some
BBB reports are now available on-line. You may also want to verify
how long your bank or mortgage company has been in business. Additional
advice can be found by contacting Allie