When you decide to buy a house, one thing you need to consider is to get a mortgage loan. Finding a lender can be overwhelming and confusing with so many types you can choose from. Understanding the advantages and disadvantages of lender options could help with making decisions, saving time and money. There are three main types of mortgage lenders, which include banks and mortgage bankers, mortgage lenders, and mortgage brokers.
Banks and Mortgage Bankers
Banks are usually the first thing you think of when seeking a lender. A retail or a direct lender is considered a mortgage bank, which include large banks, online mortgage or credit unions. If you are an existing customer, the bank can offer you a special interest rate or a discount. However, banks may not provide the best deal due to a limit on loan products and a stricter loan standard. In addition, it takes a longer closing time.
A mortgage lender is a financial institution which provides underwrites for home loans based on your creditworthiness and ability to repay. Not being constrained by regulations like banks, mortgage lenders are flexible in adjusting loan proposals followed by customers’ circumstances and goals. Loan originators who work for mortgage companies are experienced and have expertise, so they would give good advice as well as speed in closing a loan. The major downside of mortgage lenders is that they may only offer online services and it is more likely that they will sell your loan to another provider after closing.
A mortgage broker is the third party that works between you and lenders. Mortgage brokers learn your scenario, and on your behalf, can find out the best mortgage loan for your needs as well as making sure the lender would accept your application. On the flip side, the option will cost you more because of the service fee for brokers. Moreover, the broker has no discretion of how much time it will take and whether you may receive approval.
Each lender has their own benefits and drawbacks. Make sure to research and educate yourself to get the best loan for your purchase.
Kearns, D. (2019, May 19). What Are the Main Types of Mortgage Lenders? Retrieved July 1, 2020, from https://www.investopedia.com/mortgage/mortgage-guide/mortgage-lenders/
Opperman, M. (n.d.). Different Types of Mortgage Lenders. Retrieved July 1, 2020, from https://credit.org/2017/11/14/different-types-of-mortgage-lenders/?gclid=EAIaIQobChMI-4vGvK6s6gIVzJyzCh16twpbEAAYAyAAEgJCX_D_BwE
Yale, A. (2020, April 2). Advantages (and Disadvantages): Mortgage Lenders vs. Banks. Retrieved July 1, 2020, from https://www.thebalance.com/advantages-and-disadvantages-mortgage-lenders-vs-banks-4590230