Finding a lender

Every step of the loan application process is important in its own way, but finding the appropriate lender is especially important since it will have a large affect upon the total amount of money you pay for your mortgage.

As you compare lenders, you will be required to analyze their terms and rates to determine which offer is best. But before you get into all of that, it is helpful to understand the two basic types of lenders: mortgage lenders and mortgage brokers.

Mortgage lenders are companies that can provide you with a direct loan. (Banks are the most common type of mortgage lenders.) Such companies offer a limited number of loan types. A bank, for instance, might offer four mortgage programs. The same company leads you through the whole loan application process, from the introductory information sessions, to the final application approval.

Mortgage brokers, by contrast, provide you with information about the programs of many different mortgage lenders. They tend to offer a much larger number of loan types. Because mortgage brokers are representatives of mortgage lenders, rather than mortgage lenders themselves, they do not loan money directly.

Using a mortgage broker can, in many cases, simplify the loan application process. Since they are familiar with the industry and different product lines, they are often able to make tailored recommendations so as to best accommodate your needs. Still, many people prefer to work with direct lenders. Banks are especially popular since they tend to offer simple information and have long-standing reputations in communities.

While the shopping-around stage of the loan application process can be difficult, it is well worth the extra effort to find the rates and terms that will best suit your needs.