Common Cents: Sorting Out Mortgage Lenders

(September 1, 2004) --   It is important for homebuyers to know the difference between mortgage bankers, mortgage companies, and mortgage brokers.

Borrowers can obtain home loans from their local bank, which might offer no- or low-documentation loans to those who have taken advantage of their other financial services. Banks typically hold onto mortgages after the settlement date, but borrowers typically have fewer options from which to choose.

Unlike banks, mortgage companies offer home loans exclusively; and they are well versed in products designed to suit particular financial situations. However, they generally sell their loans to services once the transactions are finalized. Finally, mortgage brokers have relationships with several lenders, giving borrowers access to a wide array of loan products. Borrowers can save money with a mortgage broker; but once they are paired with a lender, the broker usually is unable to remedy problems that occur during origination and closing.

According to analysts, borrowers should seek references from real estate practitioners to determine which company or broker to use, keeping in mind that local providers will offer a higher level of personal attention.

Source: Annapolis Capital (08/31/04); Coale, Eileen