One of the least understood aspects of Portland home loans is the different types of lenders. Many people assume they have to get a home loan from a traditional savings and loan. Not so. There are many different types of lenders.
Here are the main types of mortgage lenders and how they function:
- Mortgage Bankers: Mortgage bankers (Also called Direct Lenders) are loan originators that operate with the sole objective to sell the loan they create to another source. Even though they will sell the loan they must have the ability to finance the loan in the first place and hold it until it is sold. One of the biggest benefits to using a mortgage banker, is that the funding, underwriting and origination happen “in-house”. This streamlines communication and allows for relationships to cultivate the process.
- Mortgage Brokers: This type of lender does not originate loans for your Portland home, they prepare the paperwork to submit to multiple lending institutions and get offers they will present to you to choose from. Their offers may come from any of the other types of mortgage lenders. This allows you to “shop” the loan, however it is imperative to know that your broker has a good relationship with the bank he places the loan with.
- Banks and Savings & Loans: These are the most common traditional sources of mortgage loans. They use the backing of their depositors to fund mortgages. In turn, they use the money paid by borrowers to repay the depositors’ interest for allowing them to use the money as an investment. The majority of these loans are sold on the secondary market and serviced by the bank that originated it. Only in special cases where the buyer does not fit into the guidelines, will the loan stay in the banks portfolio of loans.
- Credit Unions: Credit Unions operate in largely the same way a bank or savings and loan does by using money from a pool of depositors to finance investments in the form of mortgages and other types of loans. The difference is that most credit unions are operated out of a collective pool of closely associated people generally through a work place or professional organization. Decisions are made on a more personal level here, and the guidelines tend to be more flexible.
If you’d like help determining the best type of mortgage lender for your Portland home purchase give us a call or shoot us an email.