December 24, 2023 at 4:17 pm #28698December 24, 2023 at 4:22 pm #28730
A mortgage lender is a financial institution that offers home loans. They set the rates of interest, repayment schedule, and other terms of the loan. They check your creditworthiness before they approve the loan.
These are the different types of mortgage lenders to consider:
- Credit unions: These are non-profit organizations owned by their members and focus more on service than profits from the loans granted. But to get a mortgage from a credit union you need to qualify for a membership with them. There are limited loan products available with credit unions. Check with them about the loan products they offer and what their requirements are.
- Mortgage bankers: Any entity or person that supports a mortgage loan grant is a mortgage banker. This could be a person or a bank. Credit unions are also considered mortgage bankers but they are non-profit, while banks work for profit. You don’t need to belong to the bank to do business with them, but you need to be a member of the credit union to get a loan from them. Banks offer many types of loans: fixed-rate mortgages, adjustable-rate mortgages, government-backed loans, and even refinancing options
- Direct lenders: Direct mortgage lenders use their funds or borrow money from other investors to loan to borrowers. Mortgage banks and portfolio lenders are two types of direct lenders. There are no intermediaries with direct lenders. They process, underwrite, and close your loan themselves.
- Wholesale mortgage lenders: These lenders fund mortgages and offer them to third parties such as banks, credit unions, and mortgage lenders. Borrowers don’t interact with wholesale lenders. These lenders usually sell the loan after closing on the secondary market to Fannie Mae and Freddie Mac.
- Retail lenders: These lenders offer loans to consumers and not institutions like banks or credit unions. They work with the borrowers directly. Examples of retail lenders are credit unions, banks, and mortgage bankers which offer many loan products and handle all the processes involved in-house.
- Portfolio lenders: These lenders use their loans to originate mortgages, like a community bank. The loans they provide are non-conforming and cannot be sold in the secondary market to Fannie Mae and Freddie Mac. They are more lenient with their requirements because they are non-conforming loans. For instance, a portfolio lender is a good option for you if you need a larger loan (a jumbo loan) than the approved limit by Fannie Mae and Freddie Mac. They may also work with people with poor credit. Portfolio lenders usually have higher interest rates, fees, and closing costs, with more risk.
There are several other types of mortgage lenders like warehouse lenders and hard money lenders for borrowers looking for short-term loans or borrowers who don’t qualify for other loans like portfolio loans.
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