Lenders Home Loan

By: EconomyWatch Content   Date: 17 December 2009

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The dynamism in the lending industry is reflected in its organic structure. Earlier, it was possible to classify different constituents of the lending industry in watertight compartments. Of late, both the jargon and roles of home loan lenders has become more complex.

 

Different Types of Lenders Home Loan

When an individual sets out to buy a home loan, it is essential to know about different types of home loan lenders. A definite understanding of this aspect saves time. It also helps to strike the best possible deal by eliminating the middlemen.

 

Here are a few details about different types of home loan lenders:

 

Mortgage banker: They are large institutions that have a considerable financial footprint. They have the capability to originate home loans and prepare a pool of loans. Mortgage bankers sell the loan pools directly to either government financial institutions, such as Fannie Mae and Freddie Mac, or wholesale investors. A mortgage banker is not necessarily a banking institution. It can be a registered financial institution with the power to underwrite loans.

 

Many companies falsely call themselves mortgage bankers as a part of their marketing strategy. Thus, an individual should remain skeptical about any such claim. It is advisable to look for financial standing and government registration of the lender while purchasing loans.

 

Wholesale lenders: These are huge lending institutions that exclusively originate and underwrite loans. They do not have any retail branches to market products. They rely highly on small financial institutions and mortgage brokers to bring business for them. Some of the mortgage bankers also act as wholesale lenders.

 

Mortgage brokers: These are financial institutions with intermediate operations. They deal in home loans with the intention to broker them with wholesale lenders. They can be called ‘relationship managers.’ This is because they simply convince consumers to purchase a loan through them. The entire process of underwriting and funding takes place at the wholesaler’s end.

 

Wholesale lenders advance loans to brokers at a marginal cost. They further advance the funds to actual borrowers. Brokers add commission and other miscellaneous charges to the loan.

 

With the arrival of ecommerce, many mortgage brokers have an online presence. An individual can receive loan quotes and apply for home loans online.

 


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