Which Mortgage Company Should Handle Your Home Loan?
Scott Sheldon | Zillow Blog | October 10, 2012 | link
Choosing the right mortgage company to handle your loan is much easier said than done. Mortgage companies have many designations — mortgage broker, mortgage lender, mortgage bank — and then there are individual banks and local credit unions. How do you know you’re getting the most competitive rates the market will bear?
Begin by understanding the small differences between the various mortgage companies.
Some mortgage lingo to familiarize yourself with:
- Broker: A middleman who does not lend own money.
- Lender: Makes the loan with own funds. (The term lender can also be used to describe all types of mortgage lenders, including brokers and bankers.)
- Origination: The act of putting together a loan for compensation.
- Servicing: Collecting of monthly mortgage payments.
- Warehouse Line: The credit line lenders have in place to originate loans.
A mortgage broker is a wholesaler who acts as an intermediary between the borrower and the lender and negotiates terms and conditions of the loan in exchange for compensation. A wholesale lender offers rates to a broker, who then offers those rates to you. That lender operates off a monthly warehouse line, funds the loan, then sells the loan to Wall Street. A mortgage broker “shops” your loan with different wholesale investors, which is the main advantage of working with a mortgage broker.
A mortgage lender employs a retail loan officer who acts as the sales person between the borrower and the end investor in negotiating the terms and conditions of the loan. The lender removes the mortgage broker from the equation and typically uses its warehouse lines to originate loans and work directly with the consumer. This is the essence of retail mortgage lending