Discover the different types of mortgage lenders in the market and how they can assist you in securing a loan for your new home.
Mortgage Lenders:
Primary lending market: This market is where borrowers can find a lender to finance their mortgage, often dealing with lenders directly. Examples include commercial banks, credit unions, and mortgage brokers.
Secondary market: Investors can buy and sell debt from pre-existing mortgages. Once a mortgage is closed by a primary lender or retailer, it is packaged along with other similar mortgages or real estate loans, and sold as an investment product (mortgage backed securities).
Direct or retail lenders: Financial institutions (or individuals) that originate their own loans (either with their own funds, or by borrowing from another institution) and deal directly with prospective home buyers.
Commercial banks: Financial institutions that make a profit by offering services like banking accounts, accepting deposits, making loans, and selling other banking products.
Credit unions: Not-for-profit financial institutions, which provide mortgage financing among their services, to their members. Typically offering lower fees, lower rates, and one-on-one service with less stringent lending practices.
Mortgage bankers: Individuals who work for lending entities, banks, credit unions or mortgage companies and fund and originate mortgage loans.
Portfolio lenders: Specializing in mortgages as part of the direct lender market, but unlike retail lenders, they don’t sell their mortgages in the secondary mortgage market once they close. They keep the debt in their portfolio as an asset.
Hard money lenders: Individuals or private businesses within the retail mortgage market, who have large cash reserves, often used as a last resort, when borrowers can’t pass a mortgage stress test or quality with other less risky lenders.
Wholesale lenders: Wholesale lenders make the actual loan, working exclusively with third party lenders, but the transaction or deal is brokered through another bank or credit union, for a fee.
Warehouse lenders: Similar to wholesale lenders, but they provide short-term funding directly to the institution that is originating the loan, not the customer.
