|
Types of Lenders
There are 3 basic types of loan companies: mortgage brokers, mortgage bankers and
direct lenders. Below I've tried to outline their differences. Also, I've attempted to
show their individual benefits and draw backs.
| Direct Lenders |
These are usually banks, savings and loans or credit
unions. These lenders may sell their loans to other investors or they may keep the
loan in their portfolio. Bigger names like TruWest Credit Union, tend to have a
very professional operation and can provide their members wonderful perks. Advantages:
Often lower closing cost and competitive rates. Some often buyer's seminars, preferred
builder and REALTOR programs as well as many different ways to same money.
Disadvantages: Some of the small operations may not be as technologically
advanced as a Motorola Credit Union.
 |
| Mortgage Broker |
This is the type of loan officer you'll most likely encounter.
They vary from large, publicly traded companies to someone doing loans from their garage.
Basically, a mortgage broker makes loans for investors throughout the country. They
assemble the loan & the investor lends the money. The loan officer is paid by the
difference in the market interest rate and the loan's interest rate. The bigger the
spread, the more the broker makes. Caution should be exercised; it's important who
underwrites (makes the lending decision) the loan. Do they use their own underwriters or
does it go to the individual investors for approval? A loan officer sending the package to
an investor for approval has little to no control over the loan. Advantages:
Can be competitive on the rate.
Disadvantages: Most opportunities for unethical behavior. Unless they
underwrite the files, they have little to no control of your file. They can have more fees
than other lender types.
|
| Internet Lenders |
I like shopping on the internet as much as the next
hi-tech person. However, this may not be the best place to get a loan. Unless it is with a
large, well-know company, you are opening yourself up to fraud and abuse. |
Next: The Loan Process
|
