Mortgage Lenders A Breakdown Of The Different Kinds And Who You Should Hire
If you’re on the hunt for a new home, you likely need the help of a mortgage lender to help you be financially prepared for such a big step. There are a lot of different kinds of mortgage lenders out there, and before you try talking to any of them, it helps to be familiar with how each kind can help you achieve your goals.
There might be a lot of FAQs going through your head about mortgage lenders, and we’re here to answer them! Read on below.
What Is A Mortgage Lender?
The answer is simpler than you think. What a mortgage lender does is help customers like you acquire loans. These financial institutions have different criteria that will help them evaluate you and determine whether you can repay a loan or not.
While reviewing loan terms, look at the terms they set, interest rate, and repayment schedule to find out if these are feasible for you.
How Does A Mortgage L:ender Differ From A Mortgage Broker?
Just like real estate agents, mortgage brokers serve as the bridge between you and the right mortgage lender for you. Think of them as an agency that works with multiple lenders to find the best one for your needs. When you take out a loan, remember you’re borrowing from a lender, not the broker.
What Are The Kinds Of Mortgage Lenders?
1. Retail Lenders
Just like regular retail outlets, retail lenders deal with the customer directly. These include banks, mortgage bankers, and credit unions. They offer other products too, like personal loans, auto loans, and bank accounts.
2. Direct Lenders
These lenders are more geared towards mortgages, and likely don’t have other products at their disposal. They usually operate online or via certain branches, so it might be a bit difficult to contact them. Since they usually focus on home loans, these lenders can be a bit flexible regarding qualifying guidelines and alternatives for other buyers.
3. Portfolio Lenders
Their rates are quite low compared to their counterparts, so this is good news for more unconventional customers who don’t fit the typical lender profile. Approach these lenders if you want to acquire an unusual property or are looking for an atypical loan, like a jumbo loan. These lenders usually use their own money when making home loans.
4. Warehouse Lenders
These lenders don’t directly work with customers and offer loans through third parties like banks, credit unions, and mortgage brokers. They usually sell their offers on the secondary market after closing.
5. Hard Money Lenders
If you’re looking to renovate homes to resell or you can’t qualify with a portfolio lender, this is usually your last resort. These types of lenders are usually private individuals with cash reserves to start their own business or private companies.
Hard money loans need to be repaid in a few years so their clientele usually consists of buyers who flip houses for a profit. They tend to be flexible and close loans quickly, but can offer steep rates in return. Expect interest rates as high as 10% and 20% with a substantial down payment attached. If you can’t pay the loan, you will need to place your property as collateral and the lender can seize it in return.
6. Correspondent Lenders
Fannie Mae or Freddie Mac are two examples of the biggest correspondent lenders in the US. They work with investors or sponsors who purchase any mortgages they make according to a certain criteria.
They earn money by collecting a few points after the mortgage is issued. Because they rely on sponsors to sell, it’s possible that a sponsor can disagree with the terms, and they will then need to find another sponsor or carry the loan themselves.
Need More Info?
“What is the best mortgage lender near me?” could be the primary question on your mind. Feel free to get in touch with Procopio Team at Hunt Real Estate and our agents can help you find the most reputable lender who can safely address your needs.
Simply visit our website and click ‘Request More Information.’ Fill out a few quick details on our web page, and one of our real estate agents will be in touch with you as soon as possible. Visit today!