If you've already started searching for a mortgage-stop! There are some folks you need to meet first.
TIME magazine recently published its fifth annual list of the World's Most Influential People, neatly organized into six categories such as "leaders & revolutionaries" and "heroes & pioneers." Unfortunately, TIME left off the category that's most important to you: "lenders & brokers." We're here to pick up the slack, with a list of the lenders and brokers who could be influential in your real estate transaction.
Mortgage bankers work with you through the consultation, application, and funding phases of your loan. While they usually sell the loans that they originate, they often retain the servicing rights. This means that the banker would collect your payments and continue to function as your primary contact for the loan.
Mortgage brokers represent many different lenders and, therefore, provide you with a rich selection of loan choices. A mortgage broker will take a consulting role, explaining your loan options and helping you choose which one is best for your situation. Typically, your broker will also walk you through the loan application and manage the verification process. Once your application is complete, the broker turns your information over to a lender for approval and funding. Although the broker doesn't make the approval decision, he should advise you on the qualifications necessary for you to receive it.
A portfolio lender originates mortgage loans, and then holds them in-house, in lieu of selling them on the secondary mortgage market. Savings and loan institutions and community banks are often portfolio lenders; these entities make money by charging more on their loans than they pay out on customer deposits. Portfolio lenders don't always hold all of their loans-they may choose to sell some off to avoid having too much exposure in one loan or property type.
A direct lender offers mortgage loans in its own name. A portion of these loans will be sold on the secondary market, and others will be kept in their portfolio. Countrywide is one of the best known direct lenders.
A subprime lender specializes in funding borrowers who don't qualify for conventional mortgage loans. The borrower may lack the income, cash flow, or credit rating necessary to obtain loans from mainstream lenders. The mortgage from a subprime lender will be more expensive than a conventional loan.
Online lenders rely primarily on the Internet to establish and service their customer relationships. They often have advanced comparison tools on their websites, allowing you to research loan options at your convenience. You can usually consult with a lending specialist by telephone, but the application would be submitted online.
Now that you're in the know about the movers and shakers of mortgage lending, you're prepped to get out there and do your comparison shopping.