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what is a mortgage lenderWhen you’re in the market to buy a home, there is a good chance you’ll need to finance your purchase with a home mortgage loan. From start to finish, you’ll likely speak to many people before finally closing on your new house. Find out below what a mortgage lender is and what role it plays in your home-buying process.

A financial advisor could help you determine which financing options benefit you the most and how mortgage debt may be leveraged to your advantage. Find a qualified advisor today.

What Is a Mortgage Lender?

A mortgage lender is a financial institution or bank that provides and underwrites home loans to borrowers. Lenders set the terms, interest rate and schedule of your mortgage, weighing your loan application against your ability to repay the loan.

When you shop around for different mortgage products, you’ll likely come across various banks and institutions that all offer varying terms and rates. You can compare them individually, online or in person, or you can speak with a mortgage broker.

A mortgage broker is not a mortgage lender. Rather, a licensed mortgage broker is an intermediary between you and potential lenders. Mortgage brokers can collect your mortgage application and advise you on how to improve your creditworthiness, and since they often work for independent mortgage companies, they are able to shop around and find the best possible mortgage deal and terms for your situation. Brokers are paid by commission–usually on top of the mortgage lender fee you’ll pay for your home loan.

Different Types of Mortgage Lenders

what is a mortgage lenderJust as there are various types of mortgages, there are multiple types of mortgage lenders. The best lenders offer a variety of interest rates and incentives so a mortgage deal can be tailored to your individual situation.

  • Banks: Banks often provide mortgage-lending services as part of their loan product offerings. Applying for a mortgage through your bank may allow you to take advantage of perks and discounts only available to bank account holders. On the other hand, you may pay a higher interest rate and wait longer for processing due to bank-associated costs and high application volume.
  • Credit Unions: Credit unions offer some of the lowest interest rates available, but credit union mortgages are often high in demand and limited in number. Many borrowers may not meet the requirements for credit union membership, so obtaining a mortgage loan from these lenders may be a little difficult.
  • Non-bank lenders: Mortgage companies that are not banks or credit unions are considered non-bank lenders. Online mortgage companies and hard-money lenders alike fall into this category, but because they are online-only or even all-cash, they can offer very competitive rates and terms.

It’s important to note that there are many licensed mortgage lenders, but you should strongly consider how reputable and stable the company is prior to applying for a loan with them. Some lenders provide mortgages directly to consumers, originating their own loans, and others don’t, working instead with other lenders to fund mortgages behind the scenes. Sometimes, you’ll apply for a mortgage with one lender and then you’ll pay your mortgage to another company, the mortgage servicer. You should always ask your potential lender what help they provide and if they’ll be servicing your loan after closing.

Bottom Line

what is a mortgage lenderA mortgage lender is a bank or financial institution that originates and underwrites mortgage loans for borrowers. You’ll likely compare many different lenders in your search for the best home loan, online and in person.

Consider speaking with a mortgage broker for credit-improvement advice and to compare the mortgage options available to you. You can also speak with a financial expert to explore how to leverage your home purchase for its greatest tax advantage.

Mortgage Tips

  • Not sure which mortgage options are the right choice for your long-term financial goals? Consider speaking with a qualified financial advisor. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Use SmartAsset’s free mortgage calculator to get a good estimate of how much house you can afford.
  • Mortgage rates are more volatile than they have been in a long time. Check out SmartAsset’s mortgage rates table to get a better idea of what the market looks like right now.

Photo credit: ©iStock.com/utah778, ©iStock.com/Courtney Hale, ©iStock.com/fizkes

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