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The
types of mortgage lenders include mortgage
bankers, commercial banks, credit unions, and
savings & loans. Banks, savings & loans
and credit unions gather funds from their customers
through checking and savings accounts and certificates
of deposits. These funds are then used to make
loans. When these institutions make a mortgage
loan, they may decide to hold it in portfolio
or sell it to secondary market investors.
Mortgage
bankers get their funds typically by selling
their loans in the secondary mortgage market.
Although the loan is sold shortly after funding,
mortgage bankers may not sell the servicing
on the loan. Since, mortgage bankers
primarily have one focus of business--to make
mortgage loans-- they usually offer very attractive
loan programs and rates.
Mortgage
brokers generate about 50% of all loans. They
have access to a variety of lenders and often
offer the most choice in loan programs. Brokers
assist the consumer in completing the application
and loan selection process and direct them
to suitable lenders to fund the mortgage. Besides,
brokers can quickly place your loan with another
lender if your loan is turned down. Mortgage
brokers are paid a fee by the borrower or the
lender when a loan closes.
It
is important to understand the difference between
mortgage lenders and mortgage brokers. As a
rule, mortgage brokers don't make a decision
whether to extend you a loan, and they don't
actually make the loan. They work as intermediaries
between borrowers and lending sources. However
this fact does not mean that you are paying
a higher rate. Since mortgage brokers obtain
their funds from a variety of sources, they
can even save you money by shopping your loan.
Mortgage
lenders usually have wholesale and retail departments.
Mortgage brokers obtain rates at wholesale,
markup these rates by adding points and then
quote you a retail rate which is what you get
when you go directly to a lender. Mortgage
brokers are free to set their own pricing and
may markup wholesale rates differently.
When
deciding on a mortgage broker it is important
to choose one that shops rates with a large
number of lenders, has a fair markup and good
service.
Regardless
of what type of institution you do business
with, it's important to make certain it has
no complaints registered with state or federal
regulators or the Better
Business Bureau. Some BBB
reports are now available on-line. You
may also want to verify how long your bank
or mortgage company has been in business.
The
purpose of this newsletter is to stimulate
thought for our clients and those professionals
we network with. One should consult with
a qualified mortgage professional prior to
implementing any mortgage planning
strategies. If you are a CPA, insurance or
financial planning or real estate professional,
or legal professional receiving this newsletter
or know of one, please contact our office
to introduce yourself and your services to
us. We are always seeking to grow our
referral network and expose professional
services to our client base. |
