A mortgage lender is a financial institution or mortgage bank that offers and underwrites mortgage loans. Lenders have specific guidelines for applying for loans to verify your creditworthiness and ability to repay a loan. They set the terms, interest rate, payment schedule, and other key aspects of your mortgage. In today's tech-savvy world, many lenders and mortgage brokers have automated the application process.
You may need to go through the pre-approval process with some lenders to compare mortgage rates, terms, and products. Typically, the lender pays mortgage brokers after a loan closes; sometimes, the borrower pays the broker's fee upfront at closing. Empirical evidence suggests that banks that lend heavily in high-risk communities and rely primarily on retail deposits reduce mortgage issuance compared to other banks in the face of a monetary contraction. No evidence was found of reductions in mortgage lending initiated by other banks that do not lend much in high-risk communities or that do not rely heavily on retail deposits in response to tightening monetary policy.
However, correspondent lenders generally sell mortgages to investors (also called sponsors) who resell them to investors in the secondary mortgage market. The name of the wholesale lender (not the mortgage broker's company) appears on the loan documents because the wholesale lender sets the terms of your mortgage loan. Many mortgage brokers work for an independent mortgage company so that they can purchase multiple lenders on your behalf, helping you find the best possible rate and settlement. Wholesale lenders are banks or other financial institutions that offer loans through third parties, such as mortgage brokers, other banks, or credit unions.
These lenders borrow money at short-term interest rates from deposit lenders (see below) to finance the mortgages they issue to consumers. A mortgage bank can be a retail or direct lender, including large banks, online mortgage lenders such as Quicken, or credit unions. There are retail lenders, direct lenders, mortgage brokers, correspondent lenders, wholesale lenders, and others, where some of these categories may overlap. Many direct lenders operate online or have limited branches, a potential drawback if you prefer face-to-face interactions.
You'll want to buy a few lenders on your own, in addition to one or two mortgage brokers, to make sure you get the best possible loan deals. Mortgage brokers can help you save time and effort by purchasing multiple mortgage lenders on your behalf. Once a mortgage broker matches you with a lender, you don't have much control over how your loan is processed, how long it takes, or whether you'll receive final approval for the loan.
