LESSON 11: LOAN SOURCES -- BANKS, BROKERS AND
So now that you're a mortgage expert, it's time to
start shopping for a loan. But where do you turn? What should you
expect a lender
to ask when you apply? What do mortgage professionals look at when
deciding whether to give you a loan? That's what we'll review in
the next several lessons.
But first, let's talk about who will lend you money. It used to
be that when you applied for a mortgage, you did so at the local
bank or savings and loan where you kept your checking and savings
accounts. Today, though, borrowers have a wide range of choices.
Consumers can apply with mortgage
bankers, credit unions, thrifts,
state and regional housing agencies, financial services firms that
manage mutual fund investment accounts, home builders, real estate
agencies and online lenders, among others. Here are some of the
most common sources of mortgage money:
banks:A mortgage banker is the lender -- the one
making the loan directly. These companies make the ultimate decision
on whether to loan you money and they typically sell their loans
off into the secondary
market after making them.
bankers present you with only their programs, so you should
speak with several to comparison shop effectively.
brokers:A mortgage broker serves as a matchmaker
between a homebuyer and lender. The broker works with several lenders,
each of which offers different kinds of mortgage programs. A broker
will gather information from a borrower about the borrower's credit,
income, assets and the like, wade through his pool of funding sources
and find the best lender and loan program for that customer.
of brokers as retailers who sell goods provided by wholesalers.
In this case, the "goods" are loans provided by lenders.
Once a broker makes a loan, the borrower usually deals with the
lender whose money is being borrowed or the loan's mortgage servicer
from there on out.
broker shops across lenders with the goal of getting you a better
mortgage rate than you can get for yourself by going to a single
bank and applying for a mortgage.
are plenty of opportunities for the mortgage broker to improve
his or her profit margin on your loan at your expense, so you
need to know enough about the process to protect your interests.
Regardless of whether you use a mortgage broker or a bank, you
can review rates in your market by using Bankrate's
thrifts, credit unions:These financial institutions
generally have one menu of products just as mortgage banks do. They
may hold mortgages in their portfolios and collect borrower payments
after closing, but many sell their loans into the secondary market,
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