Choosing a Home Loan Center

Choosing a Home Loan Center

Have you ever considered the need for a good home loan center? If you are considering taling out a home loan, there are many good reasons why you should. When considering a home loan center, the first step should be to educate yourself about the different types of lenders.

Selecting the correct lender saves a buyer the time and aggravation of dealing with numerous unnecessary requests that still lead to the prospect of onerous terms or a lender of questionable stability. Fundamentally, you need to know which lender does which type of loan better than another to help you pick the best home loan center for your financial situation.

The two major types of lenders are those that accept deposits and those that don't. That is, there are institutional lenders and non-institutional lenders. The former are inter- and intra-state banks, certain securities firms, savings and loans (including thrifts), and credit unions. Among the non-institutional lenders are mortgage bankers, pension funds, and private lenders. Some mortgage brokers also fund loans through a special arrangement with a bank. A third, non-traditional lender, is a person, like a relative or a friend, who does not make home loans as part of a business.

Banks and Savings and Loans are the two most common types of institutional lenders. A typical flow of paperwork within the home loan center of large institutions would be from a loan processor, who ensures that the proper documents are in the borrower's file, to the first-line underwriter, or first-signature underwriter, who might be able to approve up to $300,000 or more, depending upon the bank. Most large lending institutions have a rule-of-thumb about approvals of strong loan packages. It takes one to approve, but at least two to decline.

When considering a home loan center you should also get some information about non-institutional lenders. Many union members, such as carpenters and longshoremen, have money in a pension fund that makes mortgage loans. Some of these, such as the State Teachers Retirement System (STRS), lend to members of the retirement group who are retired or currently working and contributing to their fund.

When considering a home loan center, you should realize that when a borrower goes to a non-institutional lender, it is usually a mortgage banker. Mortgage bankers are the middlemen in the industry. After mortgage bankers sign off on loans, they fund the loan with money borrowed from lines of credit from banks and or other sources. After closing, they immediately sell the loans to Fannie Mae, Freddie Mac, Wall Street firms, or other institutions and investors.

Mortgage bankers may offer a better rate than a bank because they operate with lower overhead. They focus on the resulting margin and don't care as much about physical image as a bank or a home loan center would.

Regardless of their approach, the lenders are all trying to originate mortgages that will create a positive cash flow with the least amount of trouble.

No matter what type of lender or home loan center you deal with, make sure the lender tells you what the offer is, and make sure that you understand the rates, terms (especially prepayment terms), and costs.

Your next step in the process of researching home loan centers would be to get information about the different grades of loans and their characteristics. These loans are graded from A through D with A being the best grade (least expensive) and D being the lowest (the most expensive).