In times that seem so distant, when you applied for a mortgage, it was assumed that you would go to your local bank – the institution where you keep your savings and checking accounts – to get your mortgage as well. I can’t exactly put my finger on when this changed, but we are now in a more modern era and the process is generally quite different.
Yes, banks and credit unions still have a significant market share for mortgage creation, with a larger market share now being occupied by companies whose business is specifically creating mortgage loans.
As one can imagine by looking at the number of competitors in the market, there is a lot of money to be made by companies providing or finding mortgages for home buyers not only on interest but also on closing costs and other fees. When looking at mortgage companies, there are two basic categories of mortgage originator …
Mortgage banker and mortgage broker.
Let’s look at the mortgage banker first. When you do business with a mortgage banker, you are dealing directly with the company making your loan. Often the term direct lender is used to describe a mortgage banker. The mortgage banker may not be a mortgage manager, which means that ultimately they won’t be the company you make your mortgage payments to, but it’s their underwriting decision to determine if your loan meets the approval guidelines. Although a mortgage banker is generally limited to the products he will offer to borrowers, many mortgage bankers have relationships with “wholesale” lenders where they can negotiate loans if the demand or borrower profile of a mortgage lender. borrower does not match his own mortgage offers.
In today’s mortgage market, underwriters of mortgage banks usually make their decisions based on guidelines set by agencies (FHA, VA, Fannie Mae, Freddie Mac). The affiliated business association of mortgage bankers is the Mortgage Bankers Association of America.
Next we will look at the mortgage broker
A mortgage broker fulfills the same needs as a mortgage banker, but in a different way. The mortgage broker is not a lender, does not make the final decision to approve or deny a mortgage application, but has the luxury of tapping into a large pool of lenders to ensure borrowers find the right match. and get the mortgage approved.
To say that using a mortgage broker creates an intermediary effect (from broker to lender to borrower) and then to assume that this effect creates more costs for the borrower is not quite correct. Mortgage brokers are not involved in the retail lending world. Most direct lenders, lenders that you can access on your own, have a wholesale service for the sole purpose of handling the loans sent by mortgage brokers. These departments are commonly referred to as wholesale lenders and they offer prices that are not available to the public and allow brokers to be competitive at the retail level with mortgage bankers. I think it’s important to point out that on occasion a wholesale lender will have an unusually low price to bolster their loan portfolio and a broker may be able to take advantage of that for you while a mortgage banker wouldn’t.
By analyzing the mortgage market, both nationally and regionally, a broker knows the specialty of a lender. The broker can identify which lender could meet a borrower’s particular needs based on an analysis of the borrower’s credit profile. The broker does everything the lender would do – check your credit and work report, organize the title search, and hire the real estate appraiser – but, once all of this information is compiled, the broker selects a mortgage lender who will accept. probably the app based on its financial data and unique information. In some offices, mortgage brokers are also lenders.
The main professional association for mortgage brokers is the National Association of Mortgage Brokers. The association is a non-profit organization with a code of ethics and practices
that applies to any broker who wants to be a member. There is a section of the association’s web site where you can search for a member broker in your area.
Whether you choose a mortgage banker or mortgage broker, you can’t be wrong in that decision on its own. As in anything, the quality is in the people and it is then good idea, no essential, to ask friends and relatives, especially those who have recently gone through the process, to recommend a mortgage professional.
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