When you apply for a mortgage, you are most likely going to apply with one of these three types of mortgage lenders- Credit Unions, Banks, or Mortgage Brokers/ Lenders. The main things that will play into your decision of which type to use are your credit score and the type of relationship you want to have with your lender. Each of the three are different in some very important ways.
· Mortgage brokers have access to several lenders and different mortgage programs.
· Mortgage brokers often can offer better loan programs and rates.
· They can better meet your individual needs.
· Mortgage brokers usually have access to wholesale rates and financing options.
· Mortgage brokers must disclose all of their compensation to their borrowers.
· Mortgage brokers only pull your credit once, then search for the best lenders for your
· They can also find the lenders who specialize in special market niches such as Condo’s,
Mobil Homes, Manufactured Homes, Land Loans, and Construction Loans.
· Most often if a mortgage broker cannot meet your needs they suggest other places for you to
Most people think that you have to belong to a special group to belong to a credit union, but more and more we are seeing several credit unions opening up to the general public. Credit Unions do mortgage loans and are a really good source.
· Credit Unions are non-profit organizations, they are funded through their members.
· Credit Unions because of their non-profit status don’t pay taxes which usually result in lower
rates passed onto you for comparable products.
· If you have an account with a credit union you are treated as an owner and you get to vote
on important matters.
· Credit Unions usually keep their mortgages they write in their own portfolios. Loans are
written to their own standards as they don’t usually need to sell your loan.
· Credit unions usually have lower income requirements.
· Credit unions don’t usually offer sub-prime loans so they don’t take as many losses which
can also result in lower rates.
· Credit Unions are usually insured through the federal government.
· Credit Unions have less fees
Banks usually have many more restrictions. Here are some of the things to consider in using a bank:
· Banks usually have only one set of underwriting guidelines and only offer loan programs that
they have available.
· Banks will either approve, decline or counter-offer you on their programs as they don’t have
available different lenders to offer.
· Banks are usually not required to disclose all of their compensation to their borrowers.
· Banks have often been known to take longer to process the loan resulting in a longer close
of escrow period.
My personal opinion on the subject of choosing a lender is to check out each type of lender as the differences above can vary with each individual person’s situation. Also, lenders often change their guidelines and restrictions so I always suggest to check out your options up front.
Important: Check out your options well before you get into an offer on a home as once you place an offer and are accepted there are very strict time frames you must meet to close the sale. Not planning ahead can lead to loosing the option to buy the home you fell in love with.
Buying a new home there are still many benefits to having your own agent (no cost to you) and you will often do better by using their financing as they may offer many benefits for using them.
Be careful with on line company's they may offer rates sounding too good to be true and promise quick closing. Often the rates they quote are only for specific clients and not something offered to everyone and a lot of them never meet the quick closing promise. It can make a big difference having a live person who is in the area, has access to the loan processors and underwriters, and can even visit them personally if issues arrive. This can make the difference of closing on time or not.