The In’s And Out’s Of Mortgage Lenders: A Quick Guide
So you want to buy a home and you’re considering getting a mortgage. However, a quick google search on the different types of mortgages in New York and mortgage lenders has your head spinning. What exactly is a mortgage lender and how do you know you’ve chosen the right lender?
To help you understand the process and quicken your loan application, here’s a quick guide on the in’s and out’s of mortgage lenders and everything you should know about choosing the one that’s right for you.
What Is A Mortgage Lender?
A mortgage lender is a financial institution or organization that loans out money for real estate purchases. Lenders have their own specific borrowing guidelines to verify your credit score and ability to pay the loan. These lenders set the terms, interest rate, payment schedule, and other significant aspects of your mortgage.
Mortgage lenders also offer refinances, which are loans designed for existing homeowners. Refinancing allows homeowners to replace their old mortgage with a new one.
What Are The Different Kinds Of Mortgage Lenders?
There are many different kinds of mortgage lenders. However, for the purpose of this article, we’ll only focus on the six most commonly known lenders.
Direct lenders provide their own loans, whether through their own funds or from loaning from someone else. These are banks, credit unions, online entities and other organizations that provide mortgages directly to you. Mortgage banks and portfolio lenders can be direct lenders. What differentiates a direct lender from a retail bank lender is their specialization in mortgages.
Mortgage brokers are more like personal shoppers for borrowers than they are lenders. They use their network of lenders to help you find the best loan and lender for your budget and needs. Mortgage brokers are licensed professionals who can counsel you on items to address in your credit report and your loan application and documentation to strengthen your chances of approval.
These kinds of lenders fund their own loans but quickly sell them to larger lending institutions on the secondary mortgage market after the loan closes. Correspondent lenders collect a fee from the loan when it closes, then immediately try to sell the loan to a larger lending institution to make money and eliminate risks. If a sponsor refuses to buy the loan, the correspondent lender must hold the loan or find another investor.
Wholesale lenders are banks or other financial institutions that offer loans through third parties. They usually don’t interact with borrowers. They usually work with mortgage brokers and other third parties to offer their loans at discounted rates. Wholesale lenders rely on brokers to bring in borrowers to apply for a mortgage.
Portfolio lenders are community banks, credit unions and savings and loans institutions that fund loans from their clients’ bank deposits so they can hold on to the loans and not resell them after closing. They also set their own borrowing guidelines and terms, which may appeal to some borrowers.
Hard money lenders are often the last resort if you can’t qualify with a portfolio lender. They are private investors or institutions who offer short-term loans secured by real estate. They typically require repayment in a short time frame, usually one to five years. While hard money lenders tend to be flexible, they charge pricey loan origination fees and interest rates, and even require a hefty down payment. They also use the property as collateral to secure the loan. If the borrower defaults, the lender takes ownership of the home.
NEED MORE INFO?
Need more information about the mortgage loan process and looking to start one for yourself? If you find yourself typing “mortgage lender near me,” you’ve come to the right place. We can help. Let the team at Procopio Real Estate help you with your mortgage loan application needs. We help our clients in every step of the home-buying process. We work with several trusted partners here at Procopio.
If you have a question, want to find out more about the mortgage loan process, or want to get to know our trusted partners, we’d be happy to take your call and answer your questions! Give us a call at 315-928-5394 and we would be happy to assist you with your inquiries.