Banks and credit unions
Home loans were once the exclusive business of banks. Not long ago, credit unions threw their hat in the ring and banks weren’t the only option in borrowing money to purchase a home. Together, banks and credit unions offered competitive options when it came to mortgage funding and served millions of homeowners nationwide. In today’s lending market, however, there are new players. The number of home-finance providers is steadily growing and offering consumers more options than ever before.
Mortgage banks
A mortgage bank is a direct lender, which means that bank employees review applications and make lending decisions. Mortgage banks, in turn, sell loans on the secondary market. The biggest benefit of the mortgage bank is its trustworthiness. These institutions are regulated by the state and federal governments and usually have ties to their local communities. It can be advantageous to deal directly with the loan-source business, rather than dealing with an outsourced customer-service agency. The downside of dealing with mortgage banks, however, is that each one offers its own programs and making comparisons can be complicated and time-consuming.
Mortgage brokers
A mortgage broker is a middleman in the world of mortgages. A single broker can represent a number of different lenders. A mortgage broker’s specializes in matching the right loan product with the right customer. The benefit of going through a mortgage broker is that they have a range of products to offer, and the expertise to compare them and offer what fits the borrower’s needs the best. Mortgage brokers also know which of their lenders are likely to approve a customer.
After the initial assessment, a broker can steer a borrower to the right lender. The disadvantage is that mortgage brokers usually tack on fees in their contracts and aren’t always state regulated. To protect themselves, people borrowing money through a home-loan brokerage should do their own comparison research, which defeats one of the primary reasons for using a broker in the first place.
Real estate agencies and home builders
Other new entrants to the world of mortgage lending are home builders and real estate agencies. Many now offer their own in-house mortgage lenders to help sell their properties. Competition in the lending industry is arduous, and many construction and real estate companies that took losses in the recession took matters in their own hands for lending. These lenders can be helpful to borrowers, as they – like mortgage brokers – they work with individual borrowers to find the best options. Most of these lenders also have ties to traditional lenders, so if they can’t find the right product, they can refer a customer to a bank that does.
Find the right mortgage lender before you buy
When it comes to borrowing money to buy a home, there are more options than ever available. Home buyers should research the options and choose the one best suited to their needs and requirements. It may take some time to figure out which way to proceed, but getting the right mortgage product when you buy your home can mean a stress-free future.
