If you are looking for financing to purchase a home or are simply desiring to refinance the home you already home, you have many options for shopping for financing.Mortgage lending companies and mortgage brokers are two of these options.Although they may sound similar, there is quite a lot of difference between these two types of businesses.This means that as you shop around, you should consider which of the two best suits your needs.
What Is a Mortgage Lending Company?
Mortgage lending companies are financial institutions that lend money to individuals to purchase or refinance loans.These include banks and specialty institutions that only deal in mortgages.In most cases, then, they are direct lending companies that finance all their own transactions.This means that if you apply for a loan from a mortgage lending company, they put up the money to purchase the property themselves.
Once a loan is closed, a mortgage lending company typically sells off the loan to another institution.This means that while you may apply for and receive a loan from Bank A, you may end up making mortgage payments to Bank B, because Bank A has sold the loan to Bank B.
Not all mortgage lending companies, however, sell off their loans.Some retain them and continue to service the loan.If you intend to apply for a loan from a mortgage lending company, you should inquire whether they intend to sell off the loan once it closes.
What Is a Mortgage Broker?
A mortgage broker is not a lender.Instead, a mortgage broker is an intermediary who matches home buyers or those who wish to refinance with banks and other lending institutions.Mortgage brokers can be helpful in that they can assist you in shopping around and finding the best loan type for your situation or finding the best interest rate.
Mortgages brokers, however, are paid fees or commissions, so this may end up being an added cost.If the broker can get you only a slightly lower interest rate than if you work with a lending company directly, this lower rate may be outweighed by the increased cost of paying the broker.In this case, there may be little to no advantage to using a mortgage broker’s service.
Even if you secure a mortgage through a broker, it is still important to find out whether the lender will continue to service the loan once it has closed or whether the loan will be sold off to another institution.
Owning a home is often perceived as a cornerstone of the “American dream.”It is a way to invest in yourself, your family and your future.Whether you are hoping to purchase a home or refinance the home you already have working with a mortgage brokers or mortgage lending companies is a personal choice.There are certainly pros and cons to each.It’s up to you to decide which will best help you attain your personal and financial goals.