What Are the Main Types of Mortgage Lenders

What is a mortgage lender?

A mortgage lender is a financial institution or mortgage bank that offers and underwrites home loans. Lenders have specific lending guidelines to test your creditworthiness and ability to repay the loan. They determine the terms, interest rates, payment schedule and other key aspects of your mortgage.

What is a Mortgage Broker?

Mortgage brokers act as intermediaries between you and the lenders. In other words, mortgage brokers do not control lending guidelines, timelines or final loan approvals. Brokers are licensed professionals who collect your mortgage application and qualification documents, and can advise you on things to address in your credit report and your financial matters to strengthen your chances of approval. Many mortgage brokers work for an independent mortgage company so they can buy multiple lenders on your behalf, helping you get the best possible rates and bargains. Mortgage brokers are usually repaid by the lender after the loan is closed; Sometimes the borrower pays the broker’s commission on closing.

Key Issues About Mortgage Lenders

Many mortgage lenders charge a fee for their services.

Retail lenders offer mortgages directly to customers.

Direct lenders generate their own loans, either from their own funds or by borrowing them elsewhere.

Portfolio lenders fund borrowers’ loans with their own money.

Wholesale lenders (banks or other financial institutions) do not work directly with customers, but with origin, funds and sometimes service loans.

The correspondent lender is the initial lender who lends and can also serve the loan.

Warehouse lenders help other mortgage lenders fund their own loans by offering short-term funding.

Hard money lenders, usually private companies or individuals with significant cash reserves, are often the choice for those looking to move homes after a quick renovation.

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