LOVELAND – There are so many options for home buyers when it comes to finding a mortgage. You can walk into your local bank or credit union, contact a major mortgage company, or use a mortgage broker. What’s the difference? There are actually a few major differences that you should be aware of.
Banks and credit unions
When you walk into a bank or credit union, they typically have in-house programs. If they intend to keep the loan (rather than selling it into the mortgage market), then their requirements might be slightly different than the ones that comply with Fannie Mae and Freddie Mac guidelines. This can be a good thing if you’re looking for a specialized program.
Dedicated mortgage companies
Companies solely in the business of generating mortgages often sell a certain percentage (or in some cases, all) of their loans into the market. This is not a bad thing, it simply means that their loans must comply with certain guidelines so that it can be sold. If sold, your payments must go to a different lender than the one who initially gave you the loan. Don’t worry, your mortgage terms and conditions cannot be changed. Given the volume of loans that many major lenders issue, they can sometimes offer more competitive rates or terms than small banks or credit unions that keep loans in-house.
Mortgage brokers are yet another entity that can provide you with mortgages. As a broker, they essentially have access to programs from hundreds of mortgage companies and can help you find one that best fits your needs. They assist with getting the loan closed an approved, after which point you send your payments directly to the designated lender. There are some mortgage brokerage companies that are also lenders themselves and will keep some loans in-house.
Which type of company should you contact?
This is always a tough decision for home buyers to make. First, you should know that it’s okay to check with more than one lender and compare their programs, interest rates and closing costs. Just make sure that you are comparing apples-to-apples when it comes to the type of program. For example, comparing an FHA loan with 3.5% down versus a conventional loan with 10% down will obviously be different even from the same lender.
Get a referral
Your real estate agent can also refer you to a reputable local lender. Some lenders are more proficient at processing and closing loans than others. Working with a good lender will make the home buying process easier and less stressful for you, which certainly has value. The home buying process can be complicated and stressful enough, so working with the right professionals is always important.
Suzanne Plewes is a Broker Associate at RE/MAX Alliance in Loveland. For real estate questions write to 750 W. Eisenhower Blvd., Loveland, CO 80537, call 970.290.0373 or e-mail [email protected].