Before choosing what kind of property financing is the best fit for your project, it is important to understand the differences between a private lender and a bank mortgage. A traditional bank may be the better choice, depending on your financial situation. If you are trying to decide between a credit union or bank for your mortgage, here's what to consider. When working with a mortgage company, you are likely to have access to more options and different types of loans compared going through a bank or credit union.
A bank or credit union may have access to information that can be used to automatically fill out forms, making it easier to fill out your loan paperwork. With a bank or a direct lender, however, borrowers can usually apply online and potentially go through the entire mortgage process digitally. Many borrowers prefer to go with the lender with whom they already have a relationship. Despite funding a loan initially, a lender often will sell your loan to a larger financial institution, and this is usually the reason lenders can offer lower interest rates than banks. The investors funding a private lender earn money through interest earned from personal loans that they extend. A mortgage broker matches your finances to a mortgage bank, which may fund your loan, but does not directly loan the money to you.
A mortgage broker acts as the middleman between you and lenders when shopping for a home loan. When shopping for a home loan, you have two primary sources of funds: either a mortgage broker or the bank (also called direct lending in the mortgage business). When shopping for a mortgage, you want to start by looking at different lenders: Check with big banks, community banks, credit unions, non-bank lenders, and mortgage brokers to get an idea of the kinds of terms that big banks are offering. All lenders use a standard loan estimate form that details what they offer, so it is easy to compare mortgage options side-by-side. Direct lenders typically provide multiple types of home loan programs, with specific requirements that you need to meet to qualify. No matter what type you select, your home loan lender must make you feel comfortable, respected, and secure. You will have to identify someone who does an excellent job helping you determine what home you can afford and what loan options will fit your individual situation.
There is no one-size-fits-all option when choosing between banks and mortgage companies - each has its advantages and disadvantages. The traditional bank mortgage route has very stringent qualifications and guidelines to follow since funds are federally insured. If you are approved for a loan from a credit union, the lender will make direct payments to the seller, and you will be making your payments to the lender over time. Rebate pricing involves accepting a higher interest rate in return for lower up-front costs. Qualifying can mean getting lower or no-fee accounts or lower-interest credit cards, and better mortgage terms. When one takes all of this into consideration, one wonders why people are not being more aggressive in their mortgage shopping.