When you go to get a home loan, you might be surprised at the different types of mortgage lenders out there. While getting a mortgage might seem pretty straightforward, it is worth it to understand the distinctions between the different types of mortgage lenders. Here is a brief look at some of the lenders you might meet as you apply for a mortgage loan:
Direct Mortgage Lenders
These are lenders that work directly with homebuyers. A direct mortgage lender originates the loan and may even service it through the entire term. A direct lender may also sell the loan to someone else.
Many mortgage bankers are also direct lenders. For the most part, mortgage bankers are lenders that originate loans for the main purpose of selling them to servicers like Fannie Mae and Freddie Mac, or selling them to investors. The idea is to finance the loans quickly using warehouse lines of credit, and then sell them just as quickly in order to be able to originate more loans.
Portfolio Mortgage Lenders
Like mortgage bankers, portfolio lenders are also usually direct lenders. However, portfolio mortgage lenders normally fund their own loans and are more likely to hold the loans for the entire term. Most of these types of mortgage lenders also offer deposit accounts. If a portfolio lender does sell a home loan to a servicer or investor, it is often after at least one year of on-time payments.
If you want access to a wide variety of mortgage lenders and programs, a mortgage broker may be able to help. Mortgage brokers are licensed and they work with a variety of lenders and borrowers. They look to match home loan programs with borrowers, sending deals to mortgage banks or wholesale lenders. Mortgage brokers process the loan, and can receive rebates and commissions; although they do not actually service any loans (the actual lenders do this).
Unlike mortgage brokers, home loan officers do not need to be licensed. They normally work under mortgage brokers to facilitate home loans for buyers, and split the commission with the broker in exchange for office space and leads for potential clients.
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Overall, it is important to be careful when choosing a mortgage lender. Be sure to check their credentials and be conscientious about the lender you are working with. Meet with at least two to four mortgage lenders in order to compare services and expertise. You should choose the lender that you are most comfortable with, one who is knowledgeable and who can provide you with a mortgage option that suits your lifestyle.
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