Mortgage Lenders

Mortgage lenders are companies that make mortgage financing available to property owners and those who want to buy real estate.

Historically, most mortgages were issued by banks, savings and loans and other financial institutions. Private individuals such as landlords often issued mortgages as well. In the Mid 20th Century the federal government entered the mortgage business in an attempt to encourage home ownership. The government did this by setting up government chartered companies such as Freddie Mac and Fannie Mae that issue mortgages to the public.

More recently many companies began specializing in mortgages and selling them directly to the public. These companies underwrote or financed mortgages by selling mortgage backed securities to investment firms and pension funds.

Direct Mortgage Lenders

Direct or third party lenders are companies that specialize in issuing mortgages. Unlike traditional mortgage lenders; which sold their products through banks and brokers, these companies sell directly to the public usually over the internet.

 The advantage to using a direct mortgage lender is that they often charge lower interest rates and provide better terms on mortgages. Direct lenders often have a greater variety of mortgages available. Many direct lenders are also more likely to work with those who bad credit and lower incomes.

In recent years the direct mortgage market has contracted because direct lenders issued too many mortgages that have been foreclosed on. This means there are less direct mortgages available than a few years ago. It is still possible to get a pretty good deal on a direct mortgage for a person who is willing to shop around.

Traditional Mortgage Lenders 

Traditional mortgage lenders generally specialized in a very basic product 30 and 40 fixed rate mortgages on single family homes. They were very conservative and often required a 20 percent down payment on a mortgage.

Traditional mortgages are still available but most people will have to go through a broker to get one. A mortgage broker is a professional who sells mortgages to the public in exchange for a fee or commission. Some financial services companies such as Primerica also function as mortgage brokerages.

There are also quite a few online mortgage brokerages which make traditional mortgage products available directly to the public. These mortgages are a little harder to get but they are generally cheaper and safer than direct mortgages.

Choosing a Mortgage Lender

Since mortgages are a highly regulated industry that is guaranteed by the government the average person shouldn’t be too concerned about their mortgage lender. If you make your payments on time and follow the terms of your mortgage it should be save regardless of what happens to your mortgage lender.

Instead a person should worry about the type of mortgage that they have. It is generally best for an individual to get a fixed interest rate mortgage because these are the cheapest mortgage. Individuals should worry about their interest rate and their mortgage terms not the identity of their mortgage lender.