Home Buyers Have New Options for Borrowing Money
Banks and credit unions
Home loans were once the exclusive business of banks. Just a few short years ago credit unions joined the fray and banks were no longer the only option when it came to borrowing money for a home purchase. Together, banks and credit unions offered competitive options when it came to mortgage funding and served millions of homeowners nationwide. In today’s lending market, however, there are new players. The number of home-finance providers is steadily growing and offering consumers more options than ever before.
A mortgage bank is a direct lender, which means that bank employees review applications and make lending decisions. Mortgage banks, in turn, sell loans on the secondary market. The biggest benefit of the mortgage bank is its trustworthiness. These institutions are regulated by the state and federal governments and usually have ties to their local communities. It can be advantageous to deal directly with the loan-source business, rather than dealing with an outsourced customer-service agency. The downside of dealing with mortgage banks, however, is that each one offers its own programs and making comparisons can be complicated and time-consuming.
A mortgage broker is a middleman in the world of mortgages. A single broker can represent a number of different lenders. A mortgage broker’s specializes in matching the right loan product with the right customer. The biggest benefit of working with a mortgage broker is that he or she has a wide range of products to offer, and the necessary expertise to compare them and choose the best one for a borrower’s particular needs and qualifications. Another advantage is that a mortgage broker knows which lenders are most likely to approve a particular application.
After an initial assessment, the broker can steer a borrower to the right company for the loan. The downsides are that mortgage brokers often include additional fees in their contracts and they are not regulated in all states. To protect themselves, people borrowing money through a home-loan brokerage should do their own comparison research, which defeats one of the primary reasons for using a broker in the first place.
Home builders and real estate agencies
Other new entrants to the world of mortgage lending are home builders and real estate agencies. Many now offer their own in-house mortgage lenders to help sell their properties. Competition in the lending world is fierce, and too many builders and real estate companies who suffered losses in the recession have taken matters into their own hands by creating lending worlds of their own. These lenders can be useful to borrowers because, like mortgage brokers, they work with individual consumers to find the best option. Additionally, most of these lenders have strong ties to traditional lending institutions, so that if they can’t find the right product for a borrower, they can refer them to a bank can make the loan.
Find the right mortgage lender before you buy
When it comes to borrowing money to buy a home, there are more options than ever available. Home buyers should research the options and choose the one best suited to their needs and requirements. It may take some time to figure out which way to proceed, but getting the right mortgage product when you buy your home can mean a stress-free future.