Shopping for a mortgage is an important part of buying a new home. But many buyers find themselves confused by the variety of lenders out there. Even buyers who are not first-time buyers may find themselves wondering what the difference between a mortgage lender and a mortgage broker is. So in this week’s blog, we’ll talk about the different kinds of mortgage lenders and how they work, so you can make an informed decision when shopping for your mortgage!
Learn about the different types of mortgage lenders in our blog.
The Different Types of Mortgage Lenders
Mortgage Lender vs. Mortgage Broker
A mortgage lender is the party that makes the loan and provides the moan you use to buy your home. They set criteria such as creditworthiness that you have to meet in order to get the loan.
A mortgage broker does not make a loan. The broker instead works with several lenders to find you the one with the best terms and rate. Think of the broker as an agent for your loan. They make their money on comission.
Wholesale Retail and Warehouse Lenders
Wholesale mortgage lenders do not deal with homebuyers directly. What they do is offer loans through third parties. These include banks, credit unions, and mortgage brokers. So in this case, consider the bank as an agent for your loan, which is originating from the wholesale lender.
Retail lenders do work directly with homebuyers. They can lend their own money, or may be working as an agent for a larger institution such as a bank.
Warehouse lenders are similar to wholesale lenders. The difference is that instead of setting their own rates and terms and providing your loan through a bank, they simply lend money to the bank, which then sets its own terms. The warehouse lender makes their money when the bank sells your loan to investors.
Mortgage Bankers vs. Portfolio Lenders
Most mortgage lenders are mortgage bankers. This means they don’t lend their own money. Instead, they borrow money from warehouse lenders and use it to provide loans to consumers. After they make a loan, they sell it to investors to pay the short-term note they owe to the warehouse lender for borrowing the money.
Portfolio lenders on the other hand use their own money to make you a home loan.
Direct Lenders
A direct lender is just a term that means the lender orginates their own loans. These loans can be originated with their own money, or with borrow money. So, portfolio lenders and mortgage bankers are both direct lenders. Warehouse lenders are not direct lenders.
Correspondent Lender
These lenders work with investors. When the correspondent lender makes a loan, the investor, called a sponsor, will buy it if the loan meets the sponsor’s criteria. Fannie Mae and Freddie Mac are the largest and most well-known sponsors. If the loan doesn’t meet the sponsor’s criteria, the sponsor can decline it, which means the correspondent lender has to find another sponsor or carry the loan themselves.
Lifetime Series Homes: Your Home Builder in Maryland
Lifetime Series Homes is a home builder in central Maryland that offers fast construction of semi-custom homes. To learn more about building your new home with Lifetime Series homes, contact us today at 410-549-4443! You can also keep up with us on our blog as well as on Facebook, Twitter, Google+, Pinterest and YouTube.
Tags: mortgage lenders