There are several types of mortgage lenders and it is important that you know which one could offer you the best mortgage. The key quality you are looking for in a lender is a good track record of service and reliability.

Mortgage Banker – Mortgage Bankers are lenders that are large enough to originate loans and create pools of loans, which they sell directly to major investors.

Advantages – Since they are usually a “brand name”, they have competitive first time buyer programs, lower interest rates and costs.

Disadvantages – General problems when you are working with a big bank.

Portfolio Lenders – An institution, which is lending their own money and originating loans for itself is called a “portfolio lender”. They are lending from their own portfolio of loans and not worried about being able to immediately sell them on the secondary market. They can create their own rules for determining credit worthiness.

Advantages – Easier to qualify for a portfolio loan since their loans are usually adjustable rate loans.

Disadvantages – They are not as competitive as mortgage bankers and brokers in the fixed rate market.

Direct Lenders – Lenders who fund their own loans.

Correspondents – The term correspondent refers to a company, which originates and closes home loans in their own name, then sells them individually to a larger lender, called a sponsor. The sponsor acts as the mortgage banker, reselling the loan to a major investor.

Mortgage Brokers – Mortgage Brokers are companies that originate loans with the intention of brokering them to lending institutions.

Advantages – They have access to wholesale lender rates and can find the best rate for the borrower. If the borrower is declined the first time, the mortgage broker may have backup lenders for them.

Disadvantages – Mortgage Brokers can work with a variety of loan officers and not necessarily all of them offer the lowest rates.

Wholesale Lenders – Most mortgage bankers and portfolio lenders also act as wholesale lenders, catering to mortgage brokers for loan origination. Wholesale lenders offer loans to mortgage brokers at a lower cost than their retail branches offer them to the general public. However, the loan costs will usually be the same to the borrower since the mortgage broker then adds on his fee.

Banks and Savings & Loans – They usually operate as portfolio lenders, mortgage bankers, or some combination of both.

Credit Unions – Credit Unions usually operate as correspondents, but larger ones could act as a portfolio lender or a mortgage banker.