What type of Mortgage Company is best for you?

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Pete Thompson is an Illinois Mortgage Broker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois.  How to Save Thousands when Buying a Home and Getting a mortgage.

What type of Mortgage Company is best for you?

If you are in the market for a mortgage, you are probably planning to shop around to get the best mortgage rates and fees. You probably have a type of loan in mind, and you certainly have a goal in mind for how the financing will meet your needs. There are a lot of things to consider when shopping for your mortgage, but one thing most people neglect to check on, is what type of company their mortgage company is. There are three types of companies that do most of the mortgages both here in Illinois and throughout the country: banks, mortgage banks and mortgage brokers. Each type of mortgage company has advantages and disadvantages. Knowing how each operates will give you the information you need to choose the company that is right for you and your needs.

The first place many homebuyers look is their local bank. Banks are in the business of making loans, so it is normal to think they would be a great place to start. Most banks do offer mortgages, but mortgages are a sideline, not a specialty. You may find that the same person who is handling the car loans also does the mortgage lending. Because banks aren’t their specialty, getting a loan from a bank may take longer than it would through a mortgage broker or a mortgage banker. With many banks the loan has to go through the loan committee to be approved. If you have are trying to close quickly a bank might not be your best option. Because mortgages are not their main business, it is also common for banks to be priced higher than mortgage bankers or mortgage brokers. On the other hand, sometimes you can get a loan approved through your local bank that might not fit the underwriting guidelines that mortgage bankers and mortgage brokers go by. And if you need a home equity loan, the local bank is probably your best option.

Mortgage brokers are another option to look at. Mortgage brokers are pure middle men who get paid by bringing loans to outside investors (usually big banks). The mortgage broker will take in the loan application, process the documentation and send the loan out to the investor for the underwriting and loan approval. At closing, you will close the mortgage with the end investor. Mortgage brokers can often bring in loans cheaper than the banks could do it with their own branches, so mortgage brokers have become a big factor in the market. A good broker can have a variety of different lenders that they work with, so they can find the lender who matches up best with each borrower’s situation, and their prices are usually very competitive because they see which lender offers the best rates on any given day. The disadvantage of a mortgage broker is that too many brokers, and often the ones quoting the lowest rates, may not be around long enough for you to close your loan with them. The financial requirements for becoming a broker are low (You need a $40,000 net worth in Illinois), and any time there is a shakeup in the industry a lot of small, and sometimes big, mortgage brokers bite the dust. If your loan is in process when this happens you may loose any money you put in and have to start the process over.

The other main option is the mortgage banker. Like a mortgage broker, the mortgage banker is a specialist who does only mortgage loans. The difference between mortgage brokers and mortgage bankers is that the mortgage banker will handle every aspect of the loan themselves, so they will process the loan, underwrite it and fund the loan with their own money. Because they have more control, mortgage bankers are usually able to close loans faster. Because they are taking on more responsibility, they are also able to get better pricing, so their rates and fees are going to be very competitive also. Most of the FHA loans are done by mortgage bankers who again are able to control the process. Mortgage bankers are usually bigger companies and they have to be stronger financially, which gives you more safety. The biggest disadvantage of dealing with a mortgage banker is that they are often tied in with one source of funds, so their pricing may be very aggressive at times, but out of the market at other times.

There is one other type of mortgage company to look in to, the mortgage banker/ mortgage broker hybrid, such as the company I work with. These companies are mortgage bankers in that we control the entire process and handle everything from taking the application to preparing the closing documents, and the loans are all closed in the mortgage companies name and with their own funds. The difference is that with a hybrid mortgage banker, they have many sources of financing. For example, we have over 60 different wholesale lenders we deal with, and like a mortgage broker we can lock the loan in with the lender with the best pricing who fits the borrower’s needs. After we close the loan with our own funds the loan will be shipped off to the lender it was locked in with. In a way they have the best features of both mortgage bankers and mortgage brokers.

So when choosing who to work with, do a little more digging and find the company who will work best for you.

How to Save Thousands when Buying a Home and Getting a mortgage? For information on the latest mortgage news and a breakdown of current Illinois mortgage rates, please visit Chicago Mortgage Rates and News.

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