Shopping for a mortgage can sometimes be frustrating when trying to understand the differences between types of lenders, what they offer and some of the pros and cons of each. Knowing the facts can not only answer some of your questions, but quell some of the apprehensions you might have when shopping for a mortgage loan.
There are three types of mortgage lenders: banks, mortgage bankers and mortgage brokers. Now, let’s take a look at what each has to offer.
Banks do more than hold the contents of your savings account; they offer competitive rates on auto loans, personal loans and mortgage loans. You’ll also benefit from the personal touch and convenience that banks offer like possible flexible lending if you have a long-standing relationship and the convenience of one location for all your financial to-do’s.
However, sometimes a bank isn’t the best place to obtain mortgage financing because of its strict lending guidelines, limited loan options, long processing times and the use of national loan underwriting and appraisal vendors.
While banks are great in assisting with your overall finances, their access to all available mortgage products is limited. Additionally, bankers are not subject to federal mortgage licensing standards, limiting their knowledge of mortgage industry laws and regulation.
Mortgage bankers work with multiple lenders (Fannie Mae, Freddie Mac, Wells Fargo, Chase, etc.) in order to offer many home loan options such as: Conventional, Jumbo, FHA, VA and USDA. In addition to offering competitive rates, various loan products and the benefits of local appraisers and underwriters, mortgage bankers typically have a team of in-house underwriters and loan processors which translates into faster closing times.
Mortgage bankers are federally licensed and are well-versed in mortgage lending laws, regulations and lending rules. Bankers also employ federally licensed mortgage professionals, who have chosen a career in selling mortgages; this translates into a long-term lending relationship.
Mortgage bankers do have their disadvantages, which include: financial services limited to mortgages and lack of physical presence.
Mortgage brokers are federally licensed and employ federally licensed mortgage professionals to sell a variety of mortgage loan products. Mortgage professionals are well-versed in many different loan products which enables them to assist you search for a suitable loan product. Brokers offer competitive rates and a variety of loan products.
So what’s the difference between bankers and brokers? Brokers do not order appraisals or underwrite loans; every loan is sent directly to the offering lender for processing and underwriting. Alternatively, a banker offers in-house loan processing and underwriting and lends you money by using a warehouse line of credit.
A loan can be a challenging step on the road to home ownership and picking the right lender can help set the landscape for your mortgage experience. Be sure the type of financial institution you choose suits your financial needs and goals, offers a competitive rate and provides top-notch customer service.
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