How to Compare Mortgage Lenders

 Finding the best mortgage lender takes plenty of research and shopping around. You can choose from many options, such as banks, local USDA financing for rural housing, mortgage brokers, and online lenders. Making things more complicated, each lender has a different approach to rates, loan terms, down payment requirements, closing costs, and more.

The home-buying process is about taking things one step at a time. In this blog post, you will learn about the different types of mortgage lenders, how to compare mortgage lenders, and what to ask to find the right mortgage for you. 

 

What Are the Different Types of Mortgage Lenders?

Due to the variety and number of available lenders, selecting a mortgage lender can be one of the more time-consuming aspects of the home-buying process. Here are some of the most common types of mortgage lenders and what you should know about each of them: 

 

Direct Lenders

A direct lender can be a bank, credit union, online entity, or an organization that USDA home financing  directly to the borrower. In other words, the mortgages are created, funded, and managed by the direct lender. The loan’s rates and terms are also established by the lender and can differ significantly from lender to lender.

One benefit of working with a lender is the partnership. Borrowers work with one loan officer who processes their application until closing. 

On the other hand, rates and terms vary widely between lenders, making some borrowers feel like they’re taking a gamble. 

 

Mortgage Brokers

Mortgage brokers are independent, licensed professionals who evaluate a borrower’s financial portfolio to match them to the right lender. Brokers do not fund loans, set interest rates or fees, or make lending decisions. Instead, they receive a 100% Purchase Financing amount for their services, which the borrower pays through the mortgage costs. 

A good mortgage broker will work with multiple lenders on a borrower's behalf, providing more opportunities for competitive interest rates. On the other hand, the broker’s commission can potentially create a conflict of interest if they select a mortgage to prioritize their commission over the benefit to the borrower. 

 

Correspondent Lenders

A correspondent lender is one that originates and funds the loan, but then sells it to a larger lending institution in the secondary mortgage market to act as the loan servicer (the one who collects payments). Although the borrower benefits from an array of loan products, the entity managing the mortgage is unknown USDA Rural Housing and Properties  sale. This option lacks the personability of a trusted advisor. 

 

Wholesale Lenders

Wholesale lenders do not interact with a borrower directly. Instead, they work with mortgage brokers to offer loan products at discounted rates. They rely on brokers to assist borrowers in applying for a mortgage. 

Although the loans are discounted and provide favorable terms, going through a third party comes with many obstacles and the potential for miscommunication.