First, they're likely to have access to a wider range of credit products. . There are some specific advantages of using a mortgage company for your loan. First, they're likely to have access to a wider range of credit products than a full-service bank.
Banks structure their own lending programs according to guidelines set by Fannie Mae, Freddie Mac, the FHA and the VA. But if your situation doesn't fit your criteria, they'll reject your loan. Mortgage lenders generally offer a greater variety of loan options and may be more lenient with borrowers with damaged credit. Banks tend to have fewer loan options and tighter lending criteria.
Without a doubt, there's nothing necessarily wrong with getting a mortgage from your regular bank. It could turn out that they offer the best terms for someone with your credit and financial profile on the type of mortgage you're looking for. But the odds are against it: there is so much variety in the rates and conditions offered by different mortgage lenders that it would take a lucky break for your regular bank to become the one with the best offer for you. The best route for you could decide if you already know a good mortgage broker or a bank loan officer.
If you have an opinion about a great broker or banker who is knowledgeable and trustworthy, or if you've had a good experience working with your bank to get a loan in the past, that could tip the balance. Mortgage lenders come in all shapes and sizes. Your local bank is a mortgage lender. So is the credit union down the street.
And the mortgage company on the other side of town can also provide you with a mortgage. Let's start by defining the term mortgage lender. If you meet the debt-to-income ratio requirements and meet your lending guidelines, your bank will give you a loan so you can buy your first home. But that's not the only thing a bank does.
Banks also offer other financial services to both consumers and businesses. Checking and savings accounts, ATM services, and online bill payment services are good examples. In other words, mortgages aren't your bank's first or only priority. And while you may be able to get a good deal on the interest rate or the length of the term of a mortgage if you have a long-term relationship with your local bank, your mortgage processing will take a backseat to other financial services.
This is how banks work. While each provides money, a smart real estate investor must know the differences between the two. Traditionally, banks are less expensive, but it's harder to work with them and get a loan approved with them. Private lenders tend to be more flexible and responsive, but they're also more expensive.
Usually, a mortgage broker will handle paperwork and disputes with lenders on your behalf; a good mortgage broker will save you time and stress. Researching and finding a mortgage lender on your own may equal some of the benefits of working with a broker, but a mortgage broker may have access to more resources. These are additional fees that the lender adds in part to cover expenses associated with the loan, such as legal statements and obtaining credit reports, but also as its own fees for originating the loan. These lenders are generally less tightly regulated than banks, so they can customize loan recommendations based on the buyer's exact financial needs and homebuying goals.
However, specialized mortgage lenders are gaining an increasing share of the mortgage lending market because of their flexibility and speed in closing loans. Mortgage brokers are essentially liaisons that work with potential homebuyers to find the best lender for their particular situation. As a result, it is generally easier to obtain approval from a private lender than from a traditional bank, since private lenders can customize each loan based on a set of internally established criteria, such as credit ratings, the loan-to-value ratio, and levels of debt /entry. Direct lenders usually offer several types of home loan programs with specific requirements that you must meet to qualify.
Private lenders, while still subject to state and federal laws, are significantly less regulated and may be more flexible in terms of the types of loans they provide and who their customers are. Still, look closely at the numbers and make sure you're clear about the broker's fee structure if you're comparing a loan where the lender would pay the broker's bill to one where you would pay. Mortgage lenders usually sell the mortgage service rights on their loans to companies that provide services. However, brokers often charge high brokerage fees and may push you to seek out specific lenders with whom they have agreements.
Private lenders are engaged in taking funds from private investors and providing loans for private commercial purposes with those funds. While that may seem less expensive on paper, your lender could include broker fees in the cost of your loan. Two of the most common options are specialized non-bank mortgage lenders, such as Quicken Loans and SoFi, and large banking institutions, such as JPMorgan Chase and Wells Fargo. .
