Different Kinds Of Mortgage Lenders By Devin Harrison

If you're anything like the average American, hearing the words 'mortgage' and 'lender' cause you to cringe, not only in fear, but in confusion. Mortgages and loans can be a confusing topic to understand, especially when it comes time for you to get one.

If you're looking for the right mortgage lender for your needs, whether it be commercial or residential, it's important to do your research so that you aren't paying for more than what you need to be. Before you head off to an institution that you know is going to reject you or not help you understand how a mortgage loan works, consider several other options that may be a better choice for you.

Correspondents

Correspondent lenders is a company or individual who is willing to give you a loan, but it is with their own funds and in their own names. In a way, they are similar to mortgage bankers. They have the ability to extend your loan because they are giving you the loan with their own money.

A correspondent lender, once your loan has been closed, will then sell the loan off to a bigger mortgage lender. So a smaller correspondent could be a possible agent for the funding lender, or a larger company, such as Wells Fargo, who they will then sell the loan off to.

One of the benefits of using a correspondent lender is that they can help you find a loan at a lower rate because they are usually in conjunction with many other loan sources.

Portfolio Lenders

A portfolio lender, like a correspondent, is an institution that is lending their own money. These lenders are usually able to service their own loans for their entire lifespan, since they don't require to sell the loan off after it has been closed. They usually hold onto the loans they fund.

Because these lenders aren't selling the loan off to a secondary market, they can be much more lenient when it comes to their flexibility with the loans.

If your payments to this lender are being made on time and consistently, they can then become 'seasoned'. Once the loans have been seasoned, this provides the lender with the option of selling the loan on the secondary market. Although the loan is sold on the secondary market, you will still be making your loan payments to the portfolio lender.

Mortgage Bankers

Mortgage bankers, again, like a correspondent, use their own funds or funds borrowed from a lender. Once the loans have been generated, these lenders usually try to sell of the loan right away on the secondary market. They do this so that they can begin originating new loans.

A mortgage banker focuses on earning money from generating the loans and then selling them off to a secondary market. They do not keep the mortgage in portfolio.

irect Lenders

Direct lenders also fund their own loans. This is a great option for homeowners, because these lenders work with you directly rather than using a middle service or broker. Depending on what kind of lender you are working with, they can also be portfolio lenders.

A direct lender can be a bank or other small institution, since these lenders have their own deposits that they can fund loans with. Sometimes they can use warehouse lines of credit to also draw money for loan funding.

A direct lender doesn't necessarily have to be a big-name business, such as Wells Fargo. It can also be a small mortgage broker - as long as they have their own deposits or money to draw loans from.

Getting A Loan

There are many different kinds of lenders available for you to research, so if you review and compare rates and prices within each lender, you will be able to find a suitable loan rate for your needs.

About the author: Devin Harrison is a homeowner and business owner who needed to make a smart investment, but didn't know where to begin when it was time to find a loan. After much research and comparison, he found a great commercial lender who got him an affordable rate and helped him understand his mortgage loan.

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