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There was a time when most home buyers obtained
their mortgage
loans through their banks or credit unions. Today, however,
there are a number of additional home-financing providers.
Which one is right for you? Let's take a look at the
options.
Mortgage banks
A mortgage bank is a direct lender; that is, bank employees alone
review your application and make the decision to lend you money.
Typically, the bank will sell your loan on the secondary market.
Benefits of a mortgage bank:
| • |
Reliability:
You probably know and trust your local mortgage bank.
It is regulated by state and federal agencies and likely has
strong ties with your community. |
| • |
One-stop shopping:
You deal directly with the source of your loan. |
| • |
Savings:
As the loan originator, a bank may save you money in the loan
process and/or offer you better terms based on your total assets
on deposit with the bank. |
| • |
Speed:
A bank also may process your loan faster than other providers.
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Risks of a mortgage bank:
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Limited choice:
Mortgage bankers only offer their own programs. To comparison
shop, you will need to speak with several lenders. |
Mortgage brokers
A mortgage broker is a middleman who may represent
the mortgage loan products of hundreds of different lenders. The
broker's goal is to match you up with the loan product that best
meets your needs at the best price. Once your loan is approved,
you will usually deal directly with the loan originator or their
mortgage service provider.
Benefits of a mortgage broker:
| • |
Variety:
By shopping across a range of different programs and lenders,
a mortgage broker may find you a better fit than a mortgage
bank. |
| • |
Qualifying:
A mortgage broker can best steer you to the national or regional
lenders that are most likely to accept your application based
on your financial and personal information. |
| • |
Savings:
You may get a more favorable loan rate. |
| • |
Speed:
A broker saves you time shopping for a loan. |
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Chapter 2: How mortgages work
