In a period that seemed to be a long time past, when you were applying for a mortgage it was expected that you'd go to your local bank - the institution where you kept your savings and checking accounts - - to apply for your home loan. Although I'm not able to pinpoint the exact date that this was changed, we live in a modern era where the process is often significantly different.
Yes, banks and credit unions still have a large market share in mortgage origination, a larger chunk of market share is currently occupied by companies whose business is specifically to originate mortgages.
There are many competing companies on the market. Businesses that locate or provide mortgages to homeowners have a lot to make, not just on the cost of interest, but also the closing costs. If you look at firms that specialize in mortgage lending, there are two basic categories of mortgage originators...
Mortgage Banker and Mortgage Broker
Let's get started with the mortgage banker. The mortgage banker is someone who deals directly with the firm that issues the loan. The mortgage banker is usually described as a direct lender. While a mortgage banker is not a mortgage servicing company, they will not ultimately be responsible for the mortgage payment. But, it's their underwriting decision to determine if your loan is in compliance with the guidelines. The mortgage banker could be limited in what they offer to their customers. However, they often have relationships with wholesale lenders who can offer loans to customers whose borrowing needs or requirements aren't suitable for their mortgage loan offerings.
Mortgage banker underwriters in today's mortgage market usually make their decisions based on the guidelines set by agencies (FHA/VA Fannie Mae/Freddie Mac). The trade organization that represents mortgage bankers is the Mortgage Bankers Association of America.
In the next installment, we'll look at the Mortgage Broker
The mortgage broker has the same functions as a mortgage banker, however, in a different manner. The mortgage broker is not a lender and does not make the final decision to approve or decline any application for a mortgage, but has the option of drawing on an extensive collection of lenders available to borrowers to find the right fit and get a mortgage loan approval.
It's not true that a mortgage broker has an intermediary effect (broker to the borrower to the lender) However, to think this effect is a cost to the borrower. The world of loans retail is not the sole business of mortgage brokers. The majority of direct lenders, which are ones that you can get by yourself, have a wholesale division with solely the purpose of servicing loans brought in by mortgage brokers.
Wholesale lenders are called wholesale lenders. They offer prices that are not available to the public at large and enable mortgage bankers and mortgage brokers to compete at a retail level. It is crucial to mention that sometimes, a wholesale lender will price unusually low to beef the pipeline of loan originations. brokers are in a position to take advantage of this in your favor, while mortgage banks wouldn't.
In scanning the mortgage market both nationally and regionally brokers are familiar with a lender's specialty. The broker can determine what the lender is best suited to the needs of a borrower through an analysis of the borrower's credit profile. The broker checks your credit, your work history, organizes title searches, and also hires the appraiser of your property. Once all this information has been compiled the broker will choose a mortgage lender who will consider the application based upon the applicant's unique financial information. In some offices, the mortgage brokers also are lenders.
The main association of mortgage brokers is called the National Association of Mortgage Brokers It is a non-profit organization with a code of ethics and business practices that apply to every broker who would like to become an associate member. The website allows you to search for a broker who is a member of your area.
Tip
Whether you choose either a mortgage banker or mortgage broker, you can't be wrong in your choice based on. It is an excellent idea to inquire of family members and acquaintances, specifically those who have been through the process recently to recommend the best mortgage expert.
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