By: Edward McCarthy
President: Sell By Owner Listings, Inc.

Types of Home Loan Companies

When you are shopping around for a mortgage, one of the first things you need to know is the home loan companies that offer mortgages. Once you are aware of your options, you can better shop for a loan for your new home.

Several different types of home loan companies and other banking entities provide mortgages. Some of these you may already be aware of.

The most commonly used home loan companies are mortgage bankers. Most people are familiar with this type of lender. Mortgage bankers only work with mortgages. They do the work of finding the money, of underwriting the loan for the home, and then finally selling the loan to the secondary market for a profit. In some cases, these mortgage companies provide services for the loan such as collecting payments, sending statements, and collecting payments that are late. By shopping different lenders for home loans, mortgage banks are able to find the best mortgage rates.

Mortgage brokers are not specifically considered to be home loan companies. They do not do any of the underwriting work that mortgage banks do. Instead, mortgage brokers act as a liaison between borrowers and lenders. The advantage provided by mortgage brokers is the relationship they have with lenders. Since brokers work with many different lenders, they are able to provide borrowers with competitive rates. Mortgage brokers are paid commission for their service of matching borrowers with home loan companies.

Other types of home loan companies are savings and loans associations. These home loan companies primarily accept savings deposits and make mortgage loans. In many cases, the savings and home loan companies are mutually held between depositors and borrowers for the bank. However, there are some that are stock-based and sometimes publicly traded companies. Savings and loans associates are the largest lenders for mortgages in the United States.

Credit unions sometimes act as home loan companies. These banking entities are not-for-profit and are owned entirely by its members. Only members of the credit union are able to deposit or borrow money from it. Members of a credit union are able to obtain competitive rates on a mortgage loan from that credit union. When it comes to mortgages, credit unions operate in a similar manner to other lenders that are not solely home loan companies. Once your loan is processed, the credit union takes advantage of the secondary market and uses the proceeds obtained to offer mortgages to other members.

If you choose not to go through one of several home loan companies for your mortgage, there is an additional option for obtaining a mortgage. By doing what is known as an assumable mortgage, you can get a home loan without shopping around with the mortgage companies. Assumable mortgage is also known as seller financing. In this process, the seller holds the mortgage and allows the buyer to take it over once the home has been sold. Seller financing is advantageous to buyers that are not able to qualify for a mortgage by going to home loan companies. In many cases, the closing costs associated with an assumable mortgage are lower than otherwise.

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