The first step in obtaining a home loan is to find a mortgage company, bank, or broker who will lend you money.
What’s the difference between the three? Most banks, in addition to offering checking and savings accounts, offer different kinds of loans, including home mortgages. If you already have a relationship with a local bank, this may make it easier for you to get a mortgage from them.
Mortgage companies are specialists. They don’t offer any other kind of financial services; they just do home loans. Because of this, their operations are usually more streamlined than banks.
Mortgage brokers are companies that have access to many different lenders and rates, and can sift through many options to find a home loan that’s right for you. Mortgage brokers are often small companies or even individuals, and they don’t always have the back office support and streamlined systems that larger mortgage companies do.
Your mortgage interest rate is important, because it will make a difference in the amount of money you have to pay each month. However, don’t choose a mortgage lender based only on the rate. In reality, there’s very little difference in the rates you’ll be able to obtain from one lender versus another. Most mortgage lenders carry the same range of mortgage types and rates. Choose a lender who is reliable and has a record of good customer service. Ask friends and real estate agents for recommendations. If you have problem credit and one lender will not give you favorable terms, check around. Every mortgage lender has different guidelines for lending, so what one lender may consider too risky, another lender may be comfortable with.