Real Estate Information Archive

Choosing a mortgage can be very confusing. Do you want a fixed rate, adjustable rate, FHA, VA, 15 year, or 30 year mortgage? Which ones do you qualify for? Of course, you want to find a professional who is willing to help you find the best mortgage for your circumstances. Who you go to for help can greatly affect what type of loan you receive. So, who should you talk to? First you need to address the difference between mortgage lenders and mortgage brokers.

Mortgage lenders act directly with the funding source and vary depending on where their money originates. Direct lenders are a bank or a lender from a financial institution that work straight with the borrower. Correspondent lenders also work straight with the borrower, but they make loans in their own name and then sell them to larger lenders. Wholesale lenders work with mortgage brokers and loan lenders rather than directly with the borrower and sell the mortgage a few months later to another larger lender.

Mortgage brokers are the “middle man”. They act as independent contractors who hunt down financing options and match borrowers with wholesale lenders. They meet with the borrower, compile financial information (employment history, assets, credit report, etc.), determine their qualifications and best financing options, advise the borrower on choosing an option, and help them complete the application process. Once that is done, they pass the borrower’s information to the wholesale lender, who handles the underwriting and closing, and secures the funds.

Mortgage lenders work with the borrower starting with the information gathering straight through underwriting, closing, and securing the funds. Due to the direct access they have to the funding, mortgage lenders have more control over the process and are often the quickest option for securing a loan. However, mortgage brokers, who have access to multiple wholesale lenders, often have a wider selection than mortgage lenders, who are limited to their own funding source. No single lender or broker can provide loans in every category or for every need, but there are multiple lenders for different niches.

Now you know who you’re dealing with. So, how do you choose between the two? It really depends on what funding they can offer you depending on your history, the type of home you want to buy, and where it’s located. The best advice is to shop around, but try and stay local to where you are buying. Local lenders and brokers are much more accessible and easier to work with, which is very important for getting your home closed. We’ve worked with a number of reliable mortgage lenders and brokers in Wilmington, and would be happy to give you some names. Just give us a call at 910.202.2546 or visit our contact page. This is just one of the many services that we offer for free!

Meghan Riley

When shopping for a home loan, buyers will encounter numerous sources for lending. It’s important they are educated on the different types of lenders, so they choose to work with an originator that will provide them with the most choices and best programs.  It’s also good to understand how these lenders work. Many lenders will sell loans. Who you start out working with may not be who controls your loan in the long-run. Here is a quick rundown on some of the entities a buyer will see and their role.

Mortgage Banker

A mortgage banker is a lender that originates loans and resells them to the Secondary Mortgage Market, which consists of investors like Freddie Mac, Fannie Mae, Ginnie Mae, and other private companies. The loan could be sold multiple times during its lifetime. Examples of a Mortgage Banker: Countrywide Home Loans, Wells Fargo, Alpha Mortgage

Mortgage Broker

A mortgage broker is an intermediary between the lender and borrower. They do not fund the loan. The wholesale lender funds the loan. Rather, they help the borrower pull their credit report (some will even advise how to improve the credit scores), locate a loan program, fill out the loan application, order an appraisal, and find a lender to fund the loan. Their flexible position allows them access to good rates and the most programs to choose from. They are paid by either the borrower or lender at closing. Examples of a Mortgage Broker: Coastline Mortgage, 1^st Trust, Walker Jackson, etc.

Wholesale Lender

The wholesale lender underwrites and funds the loan. Some may service the loan payments. Examples of a Wholesale Lender: CitiBank, Farmers Bank, First Bank, 1^st National, First Citizens

Banks, Credit Unions, Savings and Loans

A major portion of the primary mortgage market, banks, credit unions, and savings and loans create mortgages from the money their customers provide by means of savings accounts, checking accounts, and certified deposits. Because they self-fund their loans, they are often referred to as “direct lenders”.

Banks, credit unions, and savings and loans usually manage loan payments; however, have been known to sell their loans to the secondary mortgage market. Larger banks and Savings and Loans may be referred to as “portfolio lenders”, because they can fund their own loans and don’t need to sell them to the secondary market. This frees them from the lending guidelines created by Freddie Mac and Fannie Mae, which isn’t always good for the homeowner.

Keep in mind that the roles of some of these entities overlap. A whole sale lender may share the same name as bank and a credit union may act like a broker. It all depends on their size and the department involved. Buyers should do their research and ask as many questions as they can before signing loan paperwork. It could affect their ability to refinance later on.