You have a few choices when seeking a lender for a mortgage, so it pays to learn as much as you can about each type before applying. The three main types of lenders are mortgage brokers (sometimes called "mortgage bankers"), direct lenders (typically banks and credit unions), and secondary market lenders (which include Fannie Mae and Freddie Mac). See FindLaw's Mortgage and Loan Basics and Qualifying for a Mortgage sections for additional articles and resources.Â
A mortgage broker can submit a loan to many different lenders, and typically has access to several types of loan programs. A mortgage broker can shop for the best and most competitive mortgage rates and terms available, tailored to meet a borrower's needs. Some mortgage brokers charge processing or origination fees. Mortgage bankers are lenders that are large enough to originate loans and create pools of loans. Some companies do not sell directly to those major investors but sell their loans to the mortgage bankers. They often refer to themselves as mortgage bankers as well.
A direct lender loans the money directly to the borrower. Banks and credit unions are often direct lenders. While brokers typically are licensed to operate in one just a few states, most direct lenders may operate in all 50 states. Also, it is important to note that direct lenders and mortgage brokers offer roughly the same rates. However, you may have to pay a little more for the services of a broker, since they also will get a cut of the transaction.
Federal National Mortgage Association (FNMA or Fannie Mae), Government National Mortgage Association (GNMA or Ginnie Mae) and Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) are all secondary market lenders. Many retail lenders actually receive their funds from a secondary market lender. These secondary lenders have assisted the national mortgage market by allowing money to move easily from state-to-state. The movement of loan funds helps to avoid a situation where mortgages are only available in certain areas or states. Also, the secondary lenders have established regulations and guidelines that help the general public.
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