There was a time when most homebuyers obtained their mortgage loans through their bank or credit union. 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.
A 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 are as follows.
The downside of a mortgage bank is that you have limited choices. Mortgage bankers only offer their own programs. To comparison shop, you need to speak with several lenders.
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:
Risks of a mortgage broker:
Most financial institutions offer a limited menu of loan products just as mortgage banks do. They typically hold mortgages in their portfolios or sell them on the secondary market.
Many large home builders and real estate agencies now own their own onsite mortgage company to make it easier to buy their properties. These affiliated companies may operate as a mortgage banker or broker.
Mortgage lenders have proliferated on the internet in recent years, offering fast, easy loans at competitive rates. Some are online channels of brick-and-mortar financial institutions or mortgage brokers, while others are web-based banks or brokers.
Depending on your credit history and circumstances, you may benefit by using one source of mortgage loans over another.