Who is a Mortgage Lender?
Understanding the difference between Mortgage Lender and Broker can help you make smarter choices. Mortgage lenders are licensed professionals, and they offer borrower cash either directly into the borrower’s bank account or through a third-party to fund borrower’s loan. Mortgage lenders can have different names depending upon how they get their customers or what they do with the loan after they have funded it.
Wholesale vs. Retail vs. Correspondent Money Lenders
How do they get their clients and funds?
- Wholesale money lenders usually fund mortgages that are brought in by other brokers who work as self-employed. Those self-employed brokers find consumers and take their loan applications, and later, they sell those applications to the wholesale money lenders to fund them.
- Retail money lenders usually directly reach out to clients. These retail lenders are also called “Direct Lenders.” The retail lending can be performed in a bank branch face-to-face, on the phone, or online.
- Lenders who are a mix between retail lenders and brokers are commonly referred to as “correspondent lenders.” They fund loans technically with the money they have borrowed themselves; however, they usually lock in interest rates at the same time with other money lenders. Using this strategy, they alleviate their risk as they can speedily turn around and sell the loan.
Portfolio Lenders vs. Mortgage Bankers
What happens to your loan?
- Portfolio lenders typically consist of many credit unions, community banks, and savings and loan companies. The portfolio lenders utilize money from the bank deposits of their clients to fund loans and by doing so, not only can they keep the loans but also keep them on their portfolios.
- Generally, mortgage bankers fund loans; however, they usually just turn around and sell those loans to the agencies or investors like Fannie Mae and Freddie Mac in the secondary market. These bankers typically take money from different banks to fund loans, and then when the loans are sold, they repay the money.
Who is a Mortgage Broker?
Mortgage brokers are just like matchmakers: They match both borrower and a lender with each other. They generally review your financial information and then look at different lenders profiles to match you with the best lender, one who can give you the best interest rates and terms according to your financial situation.
The advantage of having a mortgage broker is that they offer you a choice as they have the capability of matching you with many lenders. The drawback of having a mortgage broker is that once you have a matching lender, the broker’s work is completed, and then you might have some difficulty in coordinating with the individual who is funding and underwriting your loan.
The main job of loan officers is to find new consumers. They also advise borrowers on how to pick the best mortgage product and complete applications of loans. The loan officers usually earn commissions on the loans. They can also be taken as mortgage brokers if they also broker and process loans. Moreover, they are sometimes are also referred to as mortgage planners, mortgage loan originators, mortgage consultants, and home loan consultants.