A mortgage lender is an individual or company that provides loans and also takes a security interest in real property. The lender doesn’t only provide real estate loans they do more but they are referred to as mortgage keepers once they are in a business relating to real estate loans.
Looking for a lender can get confusing, and sometimes intimidating. There are so many companies and individual lenders you can pick from. Therefore, knowing and understanding the varieties of lenders you can help yourself and narrow down the stress.
The type of loan you want is important and having the right lender will save lots of time, frustration, and money. That’s the need of taking your time to check for a good one. There are many types of lenders, knowing what they do will help you know the one to go for. There are retail lenders, direct lenders, wholesale lenders, correspondent lenders, and so many more, where some of these can overlap.
Most retail lenders give a mortgage to their consumers directly, not institutions. They can be credit unions, mortgage bankers, and even bankers. Retail lenders offer other things like checking and savings accounts, auto loans, and personal loans with the addition to mortgages.
Borrowers get their loans from a portfolio lender, the loans are given to borrowers with the portfolio lenders money. Portfolio lenders do not depend on the demands and interests of other investors. They have their borrowing terms and guidelines, that are favorable to some borrowers. For instance, those who seek jumbo loans or buys investment property will see portfolio lenders be more flexible.
Direct lenders generate their own loans. They mostly use their own funds for loans or get them from somewhere else. A portfolio lender and mortgage banks can be seen as a direct lender. Meanwhile, the specialization in mortgages differentiates a direct lender from a retail lender.
Retail lender tends to have strict underwriting rules and also sells many products to their consumers. With a speciality of home loans, direct lenders are more flexible compare to retail lenders with qualifying and more options for borrowers. A direct lender offers mainly their products much like a retail lender.
So you have to go for many direct lenders to make a comparison. Most direct lender has limited space and therefore operate online which can be a drawback. Like a face to face meeting.
Wholesale lenders are mostly banks and financial institutions that provide loans to third parties. They are credit unions, mortgage bankers, and other banks.
They don’t work with customers directly, they mostly get the funds for the loans. Their name appears on the Los document (not the company of the mortgage brokers) because they make the terms of your home loan.
Moreover, many banks operate as a wholesale and retail lender. Shortly after closing the wholesale sell their loans on the secondary market.
Warehouse lenders offer funds to other mortgage lenders to give loans to customers. They offer a short term fund to other mortgage lenders, they are quick in offering credit as soon loan is sold on the secondary market. Also, they do not meet or interact with consumers just like correspondent lenders.
They use mortgages as collateral until when their clients, which are other smaller mortgage banks and correspondent lenders pay the loan.
When your mortgage is issued, that’s when the correspondent lenders come in. They mostly initiate the loan, and some times service the loan. Correspondent lenders sell the mortgage to investors then they sell them to investors.