There are many types of different mortgage lenders available today and they come in all sorts of shapes and sizes. The first lender many of us ever used was the “Bank of Dad and Mom.”
Whether we were going to purchase a skate board, walkman, or even our first vehicle, the parents check book was kept open in order to help make it happen.
Interest rates were outstanding and we could always borrow with little or no interest. Amazing!
Whether you’re looking to:
- Purchase home/property
- Refinance our existing mortgage loan
- Opening a home equity line of credit (HELOC)
For any of those options, there are numerous lenders out there — e-lenders, mortgage brokers, banks, credit unions — happy to assist you in finding a mortgage loan.
It is not because they believe you will be happy in that beautiful three-bedroom two-bath home in the trendiest part of the city. It’s because they make big money lending you their money. It’s called interest.
That is why it is always in your best interest to find the lowest interest rate possible, with the best terms, which are normally not one and the same.
Before you learn what an amortization schedule is or learn about the new 50 year mortgage notes, it will help if you understand your options when it comes to types of mortgage lenders.
Nearly all fall into one of these four categories:
- Internet lending
- Mortgage brokers
- Mortgage bankers
- Banks and Credit Unions
1. Internet Lending
Internet mortgage lending has a tremendous presence online these days and not all really lend money, although it may seem that way. They are comprised of direct mortgage lenders, mortgage lending marketplaces, and mortgage content sites.
Direct Mortgage Lenders
Direct mortgage lenders loan their own money and will include both traditional and online mortgage lenders. Many of the traditional banks furnish helpful online mortgage information, including calculators, interest rates, and educational mortgage content.
Online mortgage lenders, on the other hand, offer mortgage loans directly through the internet.
They give very competitive rates and give you personalized help via e-mail, phone, and even online chat — but you likely will not meet them face-to-face during this process.
So, if you are comfortable doing your transactions online and want a lower interest rate, this choice is well worth looking into.
Lending marketplaces let you quickly compare quotes from several sources, whether it is from banks, mortgage brokers or online mortgage lenders (usually you will quotes from three to four lenders).
These services charge lenders a fee for the chance to fight for your business. Because mortgage lenders know you are comparing them side-to-side with other mortgage lenders, they will often give you a very competitive interest rates.
Once you fill out the online questionnaire, mortgage lenders will contact you by phone to begin the process of finding a mortgage loan that will best fit your needs.
Content sites concentrate on offering mortgage tools, mortgage calculators, helpful mortgage content, and educational information. These websites sites, like MortgageBreakDown.com, usually make money from advertising, donations and partnerships. Their partners oftentimes include direct mortgage lenders and mortgage lending marketplaces.
2. Mortgage Broker
Mortgage brokers are similar to a matchmaking service since they match you, the borrower, with a mortgage lender. They will review your personal financial information and match you to mortgage lenders who you fit with and who will give you the best interest rate and terms.
Mortgage brokers ordinarily make their money from the mortgage lender since they are bringing a client to them, but fees might also be charged to the client.
The reward is a large choice of mortgage brokers to choose from with the hassle of shopping for interest rates.
3. Mortgage Bankers
Mortgage bankers may or may not be related with a bank and their strength is in providing mortgages. Period. Mortgage bankers (mortgage companies) only originate mortgage loans, which means they perform credit checks, inspect and appraise the property, and prepare loan documentation.
As soon as they give you a mortgage loan, it is then sold to a secondary mortgage lender, such as Freddie Mac or Fannie Mae. A secondary mortgage lender is in the business of purchasing existing mortgages from the primary mortgage lender in order to keep the pool of mortgage money moving.
This produces strong rivals on the primary mortgage level, which in turn help to keep interest rates down for borrowers.
4. Banks and Credit Unions
Banks and credit unions are ordinarily part of the neighborhood and make their money from the funds generated from their customers who have checking and savings accounts or from other services they may offer. They issue mortgage loans and ordinarily keep control of the mortgage loan, but sometimes sell it off to secondary mortgage lenders.
Other types of different mortgage lenders include finance companies and credit unions. Whichever mortgage lender you choose, the bottom line is to do your homework and most important ask questions.