What Is a Mortgage Lender?

There are several types of mortgage lenders who provide loans for homes and other property purchases.

What Is a Mortgage?

Most people know that a mortgage is a type of loan used to purchase a house, but some people – especially those who have never owned a home – may not understand the complexities behind this type of loan.

Instead of a typical loan, a mortgage is secured by a real estate property – the house of the homeowner. Due to this, mortgages may be referred to as “liens against property” or “claims on property.”

This has consequences for homeowners. If a homeowner stops paying their mortgage before they’re paid off the loan, they may be foreclosed upon – a process by which the mortgage lender evicts the tenants of a home and sells it.

What Is a Mortgage Lender?

A mortgage lender is a bank or other financial institution which underwrites home loans. However, the answer to “what is a mortgage lender” is not as simple as that. There are several types of mortgage lenders and other parties which may be involved in the mortgaging of a home, including the following:

• Mortgage bankers: Most mortgage lenders in America fall under this category. They borrow money to fund mortgages, then sell the closed loan to an agency such as Fannie Mae or Freddie Mac or to private investors.
• Retail lenders: Banks, credit union, and mortgage bankers who provide mortgages to consumers along with other products such as checking accounts, savings accounts, personal loans, and auto loans.
• Direct lenders: Mortgage lenders who use their own funds or borrowed funds to fund a loan.
• Portfolio lenders: A type of direct lender who funds a mortgage loan with its own funds.
• Wholesale lenders: Banks or financial institutions which provide their customers with mortgage loans from a third party. The third party may be a mortgage broker or another financial institution.
• Correspondent lenders: Initial lenders of mortgage loans who later sell mortgages to investors. Investors may then sell the mortgages on the secondary mortgage market.
• Warehouse lenders: Lenders who offer short term funding to other mortgage lenders. These funds are then used to fund consumer mortgages. A warehouse lender’s funds will usually be repaid when the loan is sold on the secondary mortgage market.
• Hard money lenders: Private companies or individuals who use their cash reserves to fund a loan. Used most commonly with house flippers or in other situations where the loan is repaid in only a few years.

You may have heard the term “mortgage broker” when shopping for a home, but these professionals are not mortgage lenders. Mortgage brokers are the middleman between a homebuyer and a mortgage lender. They collect applications and documentation and then work to “shop” mortgage lenders to find the best rate available to you based on your credit report, among other factors.

How To Choose a Mortgage Lender

There are several ways to find the best mortgage lender for your situation. Nerd Wallet recommends learning about the mortgage lenders that are available to you, including credit union, mortgage bankers, and more.

If you’re unsure about which mortgage lender is right for you, you may want to compare mortgage rates online to see what your best options are. After you’ve narrowed down your choices, you may want to ask some important questions to your prospective lenders, such as:

• How do you communicate with clients? How quickly can you respond to questions or messages?
• How long will the preapproval, appraisal, and closing processes take?
• What lender fees (commissions, loan origination, points, appraisal, etc.) will I have to pay at closing?
• Are these fees, if any, able to be waived or rolled into my mortgage?
• What are your requirements for a down payment?

After you get this information from your potential lenders, you will likely be equipped to take action and make a choice about which lender is best for you.

Can I Dispute an Issue With My Mortgage Lender?

Even after taking the time to research your mortgage lender, disputes may arise between you and your lender. These disputes could revolve around billing issues, past-due payments, foreclosures, or interest rates, and other issues. Unfortunately, some lenders may be engaging in misconduct when handling these disputes despite the requirements of state or federal laws.

Attorneys are investigating several companies for potential wrongdoing, including:

• Bank of America
• Caliber Home Loans
• Capital One
• Fairway Independent Mortgage
• Freedom Mortgage
• HSBC
• Loan Depot
• Navy Federal
• PNC
• Quicken Loans
• Union Bank
• United Wholesale Mortgage
• US Bank
• Wells Fargo

If you had a dispute with any of these banks and are a resident of California, you may be eligible to take action. A qualified legal professional can help evaluate your eligibility.