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There are 4 main types of mortgage companies, and the best one for you will depend on your unique circumstance:
This is an excellent choice if you want to have all your financial accounts in one institution; however, your loan application may take longer to be approved. Also, mortgage banks may not provide government-sponsored loans such as USDA, VA, and FHA home loans.
Typically, credit unions only offer loan products to their registered members. They may offer lower interest rates and fees, but just like banks, your loan application may take longer to be approved. Moreover, they may not be government-sponsored.
Unlike credit unions and banks that offer a wide range of financial products, mortgage lenders are limited to offering real estate loans. Unlike credit unions and banks, most mortgage lenders can handle their entire loan application process “in-house”. This can reduce the amount of time involved in getting your home loan.
Mortgage brokers don’t offer financing directly to their clients. Instead, they help their clients to access different loan products and lenders. Working with a mortgage broker provides you with more options. However, mortgage brokers don’t have as much control over the loan application process as a mortgage lender or bank.
No matter who you decide to use for your mortgage services, the best place to start is by seeing what you can afford. It takes less than 30 seconds to see what kind of rate and closing costs you can expect. Get started for FREE!
Before You Go Out To Look For The Lowest Rate
The first step to getting a perfect mortgage is finding the right mortgage company for you.
Most people who are involved in the real estate business will require a good lender. Examples of such people are:
- Move-up buyers who are disposing one property in order to purchase another
- Homeowners looking to refinance
- Investors looking to add more properties to their real estate portfolio
- First-time home buyers
Many times, homeowners dive into the mortgage application process and simply settle on the “best” deal they can find.
It’s crucial to understand, however, depending on your unique circumstances, the type of lending institution you choose can be as vital as finding the right company.
With that said, it’s useful to understand the different types of lending institutions that you can approach for a mortgage.
Each Type of Lending Institution has its Own Pros and Cons
Mortgage companies are financial institutions that assist people to get loans that are secured using their real estate properties. No matter the type of financial institution you choose to work with, there with always be a loan officer (also referred to as a mortgage loan originator) involved in the loan application process.
The loan officer receives your application, checks your credit report, and collects the necessary documentation for your mortgage application.
In general, there are 4 main types of mortgage companies that homeowners can choose from.
- Banks are definitely the most popular of all financial institutions which make them a popular choice for mortgages.
- They get their funds from their own customers as well as capital investors.
On top of offering various investment, savings and checking products, banks also offer various types of mortgage loans for their real estate clients. And for this reason, most individuals use their local bank as the initial and possibly the only financial institution to source a mortgage.
2. Credit Unions
- Credit unions are just like banks, with the only difference being that they are owned by their members (account holders).
- Credit unions gather money from their registered members and require membership to apply for a mortgage.
Similar to banks, credit unions provide a wide variety of financial products to their account holders like deposit accounts for retirement, savings, and checking. Like banks, members of credit unions will often use their preferred institution as a one-stop shop, getting their basic financial services, as well as mortgage loans from the same institution.
3. Mortgage Lenders
- A mortgage lender is a financial institution that funds and originates loans in their own name.
- Unlike credit unions and banks, mortgage lenders exist for the sole purpose of offering loans that are secured by real estate properties.
- Majority of mortgage lenders do not keep or service their loans.
Instead, lenders sell their loans to servicing companies or banks. These institutions then take over the work of collecting payment on a regular basis. Mortgage lenders source their funds from banks and other capital investors. Unlike credit unions and banks, most mortgage lenders do all their own closing functions, underwriting, and loan processing in-house. They can handle all of this work thanks to their huge workforce and resources. In-house operations reduce the amount of time involved in getting a mortgage loan.
4. Mortgage Brokers
- A mortgage broker is basically a “middleman” between a bank and a homeowner.
- Mortgage brokers don’t lend money to clients directly.
- Mortgage brokers have access to many loan products and mortgage lending institutions.
In some instances, especially where your credit rating is not that good, a mortgage broker can search for a mortgage product that isn’t offered by a conventional mortgage lender, credit union, or bank. Buyers with lower credit scores, special types of income, or are looking to buy a unique property may need to get help from a professional mortgage broker. Or, if your credit union or bank cannot approve your loan, your next best bet is to work with mortgage brokers and companies.
How to Compare Mortgage Companies
Which financial institution is best suited to give you a home loan? The simple answer – it depends!
The best place to get a home loan will vary from one person to the next, according to their unique needs and circumstances at that time. For instance, if you want your mortgage financing approved quickly, it’s crucial to know how long the loan application process will take. In that case, a mortgage lender or broker may be better suited, as they often approve loans faster than credit unions or banks.
If time isn’t a huge factor, and you want to have all your financial accounts in one institution, your local credit union or bank will be better suited for you. However, though some credit unions and banks can offer lower interest rates and closing costs, they may not offer government-sponsored loans like VA or FHA mortgages. USDA mortgage lenders may be even more difficult to find. If your current circumstances require that you look for a government-sponsored loan, it’s crucial to know whether your credit union or bank can offer this type of loan. If not, a mortgage lender or broker may be a better option for you.
Another crucial factor comes into play if your credit rating is not so good, if you have too much debt when compared to the current income you are getting. Credit unions and banks tend to have stricter underwriting rules. With that said, these institutions may not approve your loan if you have a poor credit score. However, mortgage brokers and lenders tend to be more lenient. No matter the lending institutions you settle on, it’s important that buyers compares oranges-to-oranges when it comes to fees and rates.
If your main goal is to get the lowest rates and closing fees, compare closing fees and rates on the same day. Closing fees and rates change every day.
What are today’s rates?
Buyers should always shop and compare loan products from different institutions. Rates are still relatively low. With some due-diligence, you can get an amazing rate within no time. Request quotes from multiple companies. You can begin here. Your private information is not needed, and all quotes come with an instant view of your current credit rating.