How to find the best lenders

All loan officers will tell you that theire company's the best and provide you with a list of reasons to back up their claim. But if you run into the same loan officer years later, chances are good that he not only but works for a different kind of lender, he'll tell you the new lender he works for is much better – and offer another list of reasons why.

In the past, most people went to portfolio lenders because they excelled at closing deals. Over time, however, mortgage bankers and brokers have become more important, and agents have gone along with the changing trend. Usually a realtor will direct you to a loan officer who has a demonstrated track record of service and reliability, but sometimes a realtor will recommend a loan officer who works for a lender with whom the realtor is affiliated.

Sometimes it's more important to choose a good loan officer than a loan company. A loan officer has two very important functions – they serves as your advocate in getting the loan approved, handling all the negotiations for you. Their second function is to deliver quality loans, so you need an agent who's dependable and ethical.

As for lending institutions, each type of lender has its own strengths and weaknesses. Quality varies within each branch office depending on the loan officer, the support staff and other factors.

Different types of Mortgage Lenders

•Mortgage Bankers

A mortgage banker is a lender with enough assets to originate individual loans, as well as to create pools of loans that they sell to loan investors. Any company that does this, no matter how small or large the company, is considered a mortgage banker. Some service the loans they provide, but not all of them do.

•Mortgage Brokers

Mortgage brokers are companies that originate loans for the purpose of re-selling them to other lending institutions. The broker establishes relationships with various companies. Many mortgage brokers that also act as correspondents, which is how they can be mortgage bankers as well as mortgage brokers. Mortgage brokers also deal with lending institutions that have wholesale loan departments.

•Wholesale Lenders

Portfolio lenders and mortgage bankers act as wholesale lenders, serving mortgage brokers for loan origination. In fact, some wholesale lenders don't even have their own retail branches, relying mainly on mortgage brokers for their loans.

•Portfolio Lenders

A portfolio lender is an institution that lends its own money and originates loans for itself. They're lending for their own portfolio of loans and aren't concerned about re-selling them right away. Portfolio lenders are usually large banks or savings and loans.

•Direct Lenders

Direct lenders fund their own loans and can be small or large lenders. Large banks and savings and loans, as well as smaller institutions, have “warehouse” lines of credit from which to draw money for funding the loans they give. Direct lenders are generally (but not always) portfolio lenders or mortgage bankers.

Banks and savings and loan have deposits with which to fund loans, but usually use warehouse lines of credit instead. Smaller institutions also have warehouse lines of credit for the purpose of funding loans. Direct lenders are usually, but not always, mortgage bankers or portfolio lenders.


“Correspondent” refers to a company that handles home loans in its own name; then they sell those loans individually to a larger lender, or “sponsor.” The sponsor serves as the mortgage banker, reselling the loan.

•Bank and Savings & Loans

Both savings and loans and banks usually operate as mortgage bankers and/or portfolio lenders.

•Credit Unions

Credit unions are generally correspondents, although if a credit union were large enough, it could be a portfolio lender and/or mortgage banker, too.