Different Types of Lenders

Mortgage Brokers – Mortgage Brokers are businesses that originate loans with the intention of brokering them wholesale to lending institutions. The broker typically has an established relationship with these companies. Underwriting and loan funding usually takes place at the lending institution. Mortgage brokers deal with lending institutions that have wholesale loan departments.

Mortgage Bankers Mortgage Bankers are usually large enough to originate their own loans and create pools of loans which they may sell directly to Fannie Mae, Freddie Mac, and other investors. Companies that do this are considered mortgage bankers. Some may even service the loans they originate, but many will sell on the open market.

The majority of mortgage bankers and “portfolio lenders” also act as wholesale lenders, supporting mortgage brokers for loan originations. Some wholesalers do not even have their own retail branches, but instead rely on mortgage brokers for their loans.

Wholesale Lenders – Wholesale departments usually offer loans to mortgage brokers at lower costs than retail branches offer them to the general public. Mortgage brokers then add on fees to cover their costs of lending to individuals. Although, the result for the borrower is that the loan costs almost the same almost as if it was obtained directly from a retail branch of the wholesale lender.

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