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More of the time than not the phrase "mortgage companies" is
interchangeable with the phrase “mortgage lenders” even though it not a totally accurate
description. The term mortgage lender is a broader term and includes a mortgage company as one of
the mortgage lenders. Nevertheless, we will stick with the more common term of “mortgage
companies”.
Mortgage Companies include:
 Banks
Government Loans
Private Individuals
Mortgage Brokers
Credit Unions
Mortgage Corporations (or companies).
In this article I will talk about the differences among the above two
major lenders, banks and mortgage brokers and see which one will suit your situation the
best.
Banks
Many people will think of banks as the first place to go to for mortgage
loans, but actually banks count for less than what you think. Hence, they are not the main
source of providing home loans. Mortgage corporations provide mortgage loans as their primary
business and account for more than half of the total mortgage loans.
However, commercial banks are now competing more than ever with the other
types of mortgage lenders in terms of providing competitive interest rates. Besides that, they are
very convenient because of their locations which seem to be everywhere.
Another powerful factor that make banks competitive mortgage lenders is
that many customers have had previous loans with their banks which make customers more comfortable
dealing with something they are familiar with. At the same time the bank can offer a faster
and less costly application process since they have a customer’s information credit records and
money accounts like, checking and saving accounts, in their data system.
Although most commercial banks offer mortgage loans to their customers, it
is not their primary business, therefore, they may be more limited than other mortgage lenders who
exclusively deal with mortgage loans. Again, before you commit to any bank, make sure you shop
around and do a comparison among different type of lenders for the best deal you can
get.
Mortgage Brokers
Mortgage brokers are real estate professionals that work as a “middle man”
between the lender and the borrower. They specialize in finding the most suitable mortgage that the
borrower’s profile can fit into by knowing a large network of mortgage lenders: and they deal with
residential and as well as commercial mortgages.
It is less of a headache and more convenient to ask a mortgage broker to
find you a good deal for your home mortgage; just be aware that you are paying for that service. So
if you are trying to save money by acquiring a low interest mortgage then make sure whether the
added broker’s expenses is worth it or not.
Things to Be Aware Of...
-Do not make any commitments by signing any contracts with a mortgage
broker yet, rather ask several brokers to find the best deal in terms of interest rate, lenders
expenses, and the broker’s fees.
-The bigger amount the loan the more commission the broker makes so be
sure you get what you need in the first place.
-Yield Spread Premium (YSP) is a charge paid by the lender to the broker
which eventually raises the mortgage interest rate you are requesting. So ask if there is a YSP and
what the percentage is. If it is too high, then maybe you should consider finding another broker or
do it yourself.
-In every industry there are individuals who are not as honest as we all
like to believe and the mortgage business is no different. Some brokers will not mind if a lender
charges a higher interest rate on your mortgage so they can get a higher commission or fee from the
lender while at the same time they are getting paid performing a service for you.
To guard yourself from being taken advantage of ask the mortgage broker to
provide you with a Good Faith Estimate and Truth in Lending Disclosure as a component of the
mortgage loan process.
This mortgage reform which is called The Real Estate Settlement Procedures
Act RESPA was issued by the U.S. Department of Housing and Urban Development (HUD) to guide and
help borrowers to find the lowest mortgage cost and also to avoid overpriced loan fees. The Good
Faith Estimate reveals loan terms and closing costs.
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