6 Types Of Mortgage Lenders To Consider

There are many options to choose from when shopping for the perfect mortgage lender. Different lenders offer various benefits to homebuyers, including lower fees, less stringent lending requirements, faster closing times, and more.

How Does a Mortgage Lender Differ from a Mortgage Broker?

It’s easy to confuse a mortgage lender with a mortgage broker. A mortgage lender is a bank or financial institution that lends money to families or individuals who wish to take out a home equity line of credit (HELOC), buy a home, or refinance a home. A mortgage lender sets the standard terms, interest rate, and repayment schedule for a mortgage.

A mortgage broker doesn’t lend any money to homebuyers. Instead, a broker serves as a matchmaker between the borrower and the lender, helping identify the right mortgage opportunity.

Now that you understand the difference between a mortgage lender and a mortgage broker, let’s look at six different types of mortgage lenders and the services they offer to borrowers:

1. Direct Lenders

Just as their title suggests, a direct lender works with homebuyers directly. Banks that offer mortgages and portfolio lenders originate loans using either their own or borrowed funds.

Direct lenders typically focus exclusively on home loans. Working with direct lenders offers advantages—such as a quick turnaround time—because the underwriting and approval are carried out in-house.

2. Retail Lenders

Retail lenders include banks, credit unions, savings and loan providers, and mortgage bankers that offer mortgages directly to consumers. Unlike direct lenders, retail lenders provide additional financial services in addition to home mortgages, such as credit cards and personal loans. Borrowers who work with retail lenders will typically have a wide variety of mortgage options to choose from. 

3. Online Lenders

Two major advantages of working with an online lender are speed and convenience. Many online lenders can originate loans digitally, whereas others operate through brick-and-mortar institutions with in-person locations. Because online lenders may have lower operating costs, they can offer lower interest rates and fees, a streamlined application, and fast turnaround times. 

4. Portfolio Lenders

A portfolio lender funds home loans to borrowers with its own money, which is typically maintained using its portfolio. A portfolio lender may have more flexibility when it comes to lending requirements because it doesn’t rely on investors as its primary financial source. 

A portfolio lender can work with borrowers who may not fit the typical lender profile, such as applicants with poor credit histories but extensive savings, those wishing to invest in rental properties, or borrowers with poor credit scores. 

5. Correspondent Lenders

A correspondent lender originates loans and then sells them to a financial institution, pension fund, insurance company, or investor in the secondary mortgage market sector who may not be capable of underwriting mortgages.

A correspondent lender offers a fast turnaround time because the underwriting and approval are done in-house. It also provides a wide variety of mortgage options.

6. Hard Money Lenders

A hard money lender offers short-term loans for borrowers investing in commercial or investment properties. These loans are funded by private organizations or individuals that will accept property as collateral. 

Hard money lenders may be a good option for commercial and investment buyers—who typically renovate and resell properties quickly—because the approval requirements are less stringent.

The Right Mortgage Lender for Your Needs

Purchasing a home can be stressful. FFB Mortgage Lenders offers a variety of mortgage options to choose from, including adjustable-rate mortgages, Federal Housing Administration (FHA) loans, conventional home loans, and jumbo mortgages. Let us help you simplify the homebuying journey! Apply today.