Sources for Obtaining a Mortgage

Please be advised that no one source is always better than the other. Every company is different and individual borrowers have differing needs and preferences. There is never any substitute for shopping around, checking references and meeting loan officers face-to-face.

Mortgage Brokers: Mortgage brokers have increased market share and now are the single largest source for mortgage loans. A mortgage broker obtains financing through the wholesale department of a lender.

Because mortgage brokers can represent many different lenders they often have the most choice in loan programs. It normally does not cost you more to use a broker. This is because lenders offer wholesale prices to brokers. Mortgage Brokers then mark up the price and quote retail prices.

Because mortgage brokers have a wide range of programs they can often find the best program to fit your needs. Many mortgage brokers are small entrepreneurial firms that are flexible and willing to work with your demands and schedules.

The key is finding a GOOD mortgage broker. There is little consistency between mortgage broker firms. The difference in rates, programs and service between mortgage brokers can be dramatic. The best way to locate and identify a GOOD mortgage broker is:

1. Ask if they are a member of NAMB (National Assoc. of Mortgage Brokers).
2. Ask for references. Check with the Better Business Bureau or your local chamber of commerce.
3. Ask your friends if have done business with mortgage brokers they are happy with.
4. Find out which mortgage brokers publish or advertise their rates daily. This way you can monitor their rates.
5. Use mortgage brokers on the Internet!! Support electronic commerce and do business with companies on the 'Net. Let's build that highway together!

Direct Lenders: originate, fund and service your loan. Direct lenders are generally larger organizations than mortgage brokers and better capitalized. Direct lenders have fewer programs than mortgage brokers but may have more knowledge of the details of their programs. The loan officer at a direct lender generally has better access to underwriters (the people who approve loans) than a mortgage broker. This may sometimes mean faster approvals.

Direct lenders may be:

Mortgage Bankers

Specialize in originating and servicing loans. They generally sell their loans to investors like Fannie Mae and Freddie Mac. Their underwriting guidelines (rules to make loan decisions) are supplied to them by their investors. Mortgage bankers may interpret these guidelines based on their own lending philosophy.

Banks

Offer a wide range of financial services including mortgages. They generally offer a few select mortgage programs. Banks may keep loans in their portfolio or sell their loans. Banks may also work with other mortgage bankers to originate their loans.

Savings and Loans

Generally offer portfolio-adjustable loans which are easier to qualify for than most other loans. Many S&Ls offer reduced documentation loans that are ideal for self-employed borrowers. Many S&Ls have started offering fixed loans that are sold to Fannie Mae or Freddie Mac like mortgage bankers.

Finance Companies

Generally specialize in B and C paper loans for poor-credit borrowers, as well as 2nd mortgages. They generally raise money by selling bonds or commercial paper on Wall Street.

Private Investors

Like to earn high returns––so they typically invest in riskier loans that banks do not want to touch. Most of these loans are based on equity alone.