Many of you know that a mortgage or deed of trust is a type of security or protection that a borrower gives to a lender in exchange for the lender loaning you money. You may also know that the source that provides us with this money is given a generic name, like "lender." But who exactly is the lender? What kinds of institutions are you actually borrowing from? Are all lenders the same? Well, here is a description of the most common types of lenders:
We offer many tools to make the process easy and guide you along the way.
Calculators to enable you to understand how much money you can save, or how much loan you can afford.
Our Handy Finance Checklists ensure that you can prepare in advance all of the documentation required.
If you want to understand a specific mortgage term, consult the glossary, it contains simple explanations of the terms and jargon that you may encounter during the process.
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Mortgage Bankers are lenders big enough to create loans and pools of loans that they sell directly to lending institutions. They're also referred to as direct lenders. Examples of lending institutions that buy loans and pools of loans from mortgage bankers include:
Any company that assembles, and then sells loans, is considered to be a mortgage banker. Mortgage bankers can vary significantly when it comes to size. Some mortgage bankers service the loans they originate, but some do not. Most mortgage bankers have wholesale lending divisions within their company.
Mortgage Brokers are individuals or companies that unite borrowers and lenders together, and then facilitate the loan process between these two parties. The job of the broker is to put borrowers and lenders in contact with each other. If this contact results in a loan, the broker receives a commission, often from both parties.
Basically, a mortgage broker is an intermediary. They are typically hired by prospective borrowers who either don't know much about the lending industry, don't have time to shop around for different types of loans, or both. The mortgage broker does this work for them. In this way, the job of the mortgage broker is analogous to the job of the real estate buyer's agent, who works on behalf of the buyer to shop around for different homes.
A mortgage broker can evaluate the different types of loans available to you. They can give you insight as to which banks or financial institutions offer the most competitive rates and the terms most compatible with your particular situation.
Be sure to get all the information about the types of loans available to you in writing so that you can review it. People who obtain a loan through a broker tend to get more specialized loans than the standard fifteen or thirty-year loans that you hear about or read about on the Internet. Be sure to read every little detail so that you understand what your signature entails.
Note that when you enlist the services of a mortgage broker, you often have to pay an initial fee or commission once you obtain your loan.
Mortgage broker companies originate loans in order to broker them to wholesale lending institutions with which they have established relationships.
Direct Lender is a term that applies to any lenders who fund their own loans. This category can include mortgage bankers, portfolio lenders, or small lending companies.