About Mortgage Lenders

When we go ahead with the home buying process it is confusing and a little intimidating to shop for a lender.

What is a mortgage lender?

A financial institution or mortgage bank that offers and underwrites home loans is known as a mortgage lender. There are specific borrowing guidelines for lenders to verify a borrower’s creditworthiness and ability to repay a loan.

What is a mortgage broker?

A mortgage broker works as an intermediary between borrowers and lenders. The mortgage brokers do not have a say in the borrowing guidelines, timeline, or final loan approval.

How do the brokers help?

A borrower saves time and effort because the mortgage brokers can help by shopping multiple mortgage lenders for the borrower.

Types of mortgage lenders

  • Mortgages are provided directly to consumers by retail lenders.
  • Direct lenders originate their own loans, either by funding themselves or borrowing them elsewhere.
  • Borrowers’ loans are funded with their own money by portfolio lenders.
  • Wholesale lenders like banks or other financial institutions don’t work directly with consumers. They originate, fund, and service loans.
  • The initial lender making the loan is called correspondent lenders they might even service the loan.
  • By offering short-term funding the warehouse lenders help other mortgage lenders fund their own loans.
  • Private companies or individuals with significant cash reserves are hard money lenders, who are chosen by borrowers who want to flip a home after a quick renovation.

Mortgage bankers

Mortgage bankers in the U.S. are mostly mortgage lenders. The mortgage bank could be retail or direct lenders like large banks, online mortgage lenders, or credit unions.

Retail lenders

Mortgages are provided not to institutions but directly to consumers by Retail lenders. Banks, credit unions, and mortgage bankers are retail lenders.

Direct lenders

Direct lenders originate their own loans. They at times use their own funds or borrow them from another place. Mortgage banks and portfolio lenders are direct lenders.

Portfolio lenders

Borrowers’ are funded for their loans with their own money by a portfolio lender. So a portfolio lender isn’t obliged to the demands and interests of outside investors.

Wholesale lenders

Banks or other financial institutions that offer loans through third parties, like mortgage brokers, other banks, or credit unions are called wholesale lenders. They don’t work directly with consumers but originate funds, and many times service loans.

Correspondent lenders

When a borrower’s mortgage is issued the correspondent lenders come into the picture. They are the initial lender that makes the loan and perhaps service the loan.

Warehouse lenders

Other mortgage lenders are helped by warehouse lenders to fund their own loans by offering short-term funding. As soon as a loan is sold on the secondary market the warehouse lines of credit are usually repaid.

Hard money lenders

Hard money lenders are often the last alternative if a borrower can’t qualify with a portfolio lender or if they renovate homes to resell quickly. Hard money lenders usually are private companies or individuals with significant cash reserves.

Online mortgage lender

With the automation of the application process, it is a huge time-saver for busy families or professionals who are searching for a home, with their busy lives.

Conclusion

Searching for the right lender and loan can be a tiresome process. When you do your research before starting the process will help you with lenders and brokers.