Are you trying to get real estate financing figured out? There are a lot of options out there – including mortgage lenders, mortgage brokers, and retail lenders. In this post, we answer “What is a mortgage lender?” and four other questions you might have about mortgages.
Before we answer “What’s a mortgage lender?”, let’s start with the basics: the difference between a loan and a mortgage.
A loan can be anything from the $20 you lend to a friend who forgot their wallet to a multimillion-dollar financing deal. A mortgage is more specific: it’s the money you borrow to buy or improve real property (i.e. a piece of land or a house).
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A mortgage lender is a business that provides loans for the purchase of real estate. They may also provide refinancing, or replacing your current loan with another loan that has different terms (i.e. lower interest rates or a shorter timeframe). There are different kinds of mortgage lenders, including banks and mortgage bankers.
When you’re taking out a mortgage, you’re essentially asking the lender for money and agreeing to repay them according to defined terms. You’re offering your property as security – meaning the lender can seize your property if you don’t fulfill your payment agreement.
To ensure that you’re likely to repay their loan, a mortgage lender looks at several areas of your financial life. This can include your:
Once your creditworthiness is established, the lender may offer you a loan with an interest rate based on your circumstances and the current market.
All mortgage bankers are mortgage lenders, but not all mortgage lenders are mortgage banks. You could say that mortgage bankers specialize in mortgages – and only mortgages – while a mortgage lender could offer mortgages as well as personal loans, bank accounts, and other financial offerings.
Yes – there are the mortgage banks discussed above, direct lenders (which specialize in mortgages and use their own funds), and retail lenders (which serve individuals directly). Other players in the mortgage process include:
For full details on the differences between these mortgage lenders, read this Investopedia article.
It’s good to note that you won’t necessarily be making all your future transactions with the company that provides your loan; another institution may service (i.e. maintain records of your loan and collect your payments) or even buy your loan.
Both mortgage loan officers and mortgage brokers help you navigate the loan process. The key difference is that a mortgage broker usually works with many lenders, while a mortgage loan officer works for one lender.
Mortgage brokers can’t lend you money, but they can help you find a mortgage lender and a loan program that best meets your needs. A mortgage officer will guide you through the mortgage process within their financial institution.
Both mortgage loan officers and mortgage brokers help you assemble your financial information, fill out the loan application, and submit all the relevant proof to your mortgage lender. For a more detailed explanation, see The Difference Between Mortgage Bankers, Loan Officers, and Mortgage Brokers.
Now that you know what a mortgage lender is and what they do, keep learning! The world of mortgage lending is very complicated, so it’s a good idea to do your research. Check out Common Questions First-Time Buyers Ask About a Mortgage Part 1 and Part 2 or look at this explanation of first-time home buyer programs. And you can always contact Mortgage 1 at 866-532-0550 or find a Mortgage 1 loan officer to get detailed information.