Choosing a mortgage lender for your home purchase can be overwhelming and frustrating. Picking the right lender is so critical this can affect your financial situation and determine whether your home buying experience will be great or a nightmare. Here is an easy to understand run down on the four major options and how to choose the best option for your financial goals.Verify my mortgage eligibility (May 20th, 2022)
- The Big Bank– these are home lenders like Wells Fargo, Chase and Bank of America. If you are a high wealth individual looking for a high balance Jumbo Mortgage this may be a good choice. Or if you have high credit scores, good cash reserves and looking for a fixed rate loan it may be a good start point. Typically, big banks underwrite conventional home loan products to their own guidelines, which in many instances are stricter compared to loan programs offered by mortgage broker or hybrid lender. The bank has one set of interest rates that they set. Because of the big organization, expect less person-to-person direct contact during the transaction.
- The Credit Union – may offer very similar products as the big bank. Typically less flexibility in their underwriting guidelines and like big banks they set their own interest rates. Many times, credit unions will have some unique, or niche, portfolio loan programs- meaning the keep this loan for as long as you have your loan. However, many times these portfolio loans are adjustable rate loans. Credit Unions also are good choice for Home Equity Lines. Some credit unions do not offer FHA loans, but actually broker those loans out so always ask first.
- The Mortgage Broker has great flexibility in different programs and niche programs for less than perfect credit that do not meet conventional guidelines. Brokers typically have great choice of loan programs and competitive rates, but do not process, underwrite of fund the loan. The mortgage broker takes your application, chooses the mortgage lender, but then sends your loan to a lender for processing, underwriting and funding. The mortgage broker loses control over the loan and the timeline for closing. While typically there is good personal contact with the mortgage broker, any questions for underwriting and closing your loan are dependent on how busy or responsive the lender is at the time.
- The Hybrid– This is combination of the very best of two worlds, the big bank and the mortgage broker. Personally, I have worked as Banker, Broker and now currently in the Hybrid model. When looking at rates, guidelines and products there may be 20 different lenders to choose from. Sometimes the hybrid lender may be acting as a correspondent, other times direct to Fannie Mae, or may choose a product from a bank or a credit union. This provides the ability to find the guideline that best suits the home buyer together with the best interest rate for that day among the different options. Like a bank, the Hybrid handles your loan from start to finish- maintains full control over the loan and the closing process.
Now that you know the major differences it will be easier for you to make the right choice for choosing a lender model. Regardless of which lender you choose, make sure that the loan officer from that company is knowledgeable, experienced, explains loan options to you and has credible on-line reviews from past customers.
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