When considering purchasing a home, it is a good idea to get approved for a loan prior to beginning to look at too many homes. The reasoning is two fold in that you want to be certain that you can indeed get a loan and also that you have an idea of how much money the homeowner is willing to finance. Today, there are a number of options available to individuals wishing to purchase a home, but prior to the eighties, there were fewer choices.
Typically, prior to the 1980s, mortgages were primarily offered by commercial banks, thrifts, and some of the larger credit unions. Today, however, it is also possible to receive mortgages from mortgage brokers and mortgage bankers.
Mortgage Bankers are institutions that are classified as banks and sometimes package their own loans to sell to investors as mortgage securities. Other times, they will go through Freddie Mac, Fannie Mae, and Ginnie Mae, who in turn package and resell the mortgages.
Mortgage Brokers, on the other hand, has a number of relation ships with lenders. Their relationship is considered to be wholesale and they act as an intermediary between the borrower and the lender. It is their job to find the borrower the best deal, which often varies day by day or even hour by hour. Once the mortgage is approved and the home purchased, the mortgage brokers work is done and the borrower will deal directly with the lender.
For those with very good credit, a mortgage broker can often find the best deal available, because they are in contact with a number of different lenders. Many times, the mortgage broker will be able to get the borrower a better deal than they could possible expect from a bank or other institution.
However, for those with less than perfect credit or even no credit, going through your bank might be a better choice. The bank might not be able to offer as great of a deal or as low of an interest rate as you might get from a mortgage broker, but they might be willing to be a little more flexible if you have a good relationship with them.
Before you settle on a new lender, you may want to check the Mortgage Lender Implode-O-Meter at ml-implode.com. The site proclaims a mission of transparency, education, and accountability for the mortgage industry. The site was started in January 2007 by blogger Aaron Krowne who realized that the housing market was critical to the success of the US economy and grew frustrated by the lack of coverage of the sub prime housing crisis by the mainstream media. Starting with a single page with only 6 lenders listed, ml-implode.com soon had dozens of lenders listed and began picking up national media coverage from Bloomberg and CNN. It is now consdered and authority on the current state of the mortgage crisis in the US and received over 100,000 visitors a day.
The site breaks down the large mortgage companies into 3 categories.
Although it is a community centric forum, the editorial staff requires that 2 out of 3 of the following criteria be met before a company makes it to the “implosion” or “ailing” list:
Over all the site has some great information and is organized in a consistent manner. I highly reccomend giving it a look or even subscribing to the feed if you want to stay up to speed on the latest mortgage implosions.