Understanding Lenders and How They Help Homebuyers
Along with finding the right home, getting the right mortgage is an essential first step towards sustainable, long-term home ownership. A mortgage lender will help you compare the options available and determine how much you can borrow.
What is a lender?
A mortgage lender is the financial institution that provides the funds for your mortgage loan. Your lender is a key part of your home buying team. They will:
There are four types of lenders you can work with:
- Banks: Federally insured institutions that offer traditional loan products in addition to banking services, such as checking accounts and savings accounts.
- Credit unions: Member-owned institutions that offer services similar to commercial banks. Credit unions are formed to serve people who share things in common, such as an employer or military service, or people with a connection to a geographic area.
- Mortgage brokers: Independent finance professionals who connect borrowers with different lenders. They do not make loan decisions or lend money, but they will collect documents and information from you to shop with different lenders.
- Non-bank lenders: Companies that offer mortgage products but do not have a banking license, which means they are not subject to the same regulations as traditional banks and credit unions, but are subject to regulation state and certain federal regulations.
If you are unsure which type of lender best suits your needs, you can consult a housing counselor for assistance.
Looking for a lender
With different lenders and loan types to choose from, you should shop around to determine which options are best for you. Comparing lenders will allow you to gather more information about available mortgage products, which can save you money.
Along with finding a lender who offers a competitive mortgage rate, it’s important to find someone who offers good service and helpful information. Buying a home can be a stressful process, but surrounding yourself with the right team is a great way to ensure success.
Lenders vs Repairers
It’s important to understand the difference between mortgage lenders and mortgage servicers, and the different roles each plays throughout the lifecycle of your mortgage.
Mortgage lenders provide the actual funds for your loan and will generally work with you through the closing process. A mortgage agent takes care of the administration of your loan after you close on your home – this includes collecting your monthly mortgage payments and managing your escrow account.
Depending on how your lender decides to manage your loan, your manager and your lender may be the same. In many cases, however, the lender will decide to sell your mortgage to another managing agent. This is a common occurrence and not a cause for concern – you will be notified directly of changes to your repairer.
Repairers can also help you if you are having difficulty making your monthly mortgage payment. If you are likely to miss a mortgage payment, you should contact your repairer immediately to discuss your options.
To learn more about lenders and mortgage options, visit My Home by Freddie Mac®.