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Alternative lenders

Most potential homebuyers have traditionally obtained their mortgages from a bank or credit union.

But today, there are a variety of other outlets that can be used for home-financings.

The article, “Which type of lender is right for you?” posted on May 1, 2006 on Bankrate.com, goes through the different types of lenders that are available to consumers in addition to the traditional venues of the past.

Banks and credit unions are still very popular, safe and reliable venues to finance your mortgage, but there are other options out there. The author lists some of the other lenders in the marketplace and gives some advantages and disadvantages of each type of lender.

Some of the other lenders listed in the article are mortgage banks, mortgage brokers, internet lenders and home builders and real estate agencies. These are all in addition to the conventional banks, thrifts and credit unions.

Since there are so many options available, it is important to weigh all your options so you can see what works best for you.

Mortgage banks have many benefits in that they are reliable and often times process loans much faster since you deal directly with the source of your loan.

“A mortgage bank is a direct lender; that is, bank employees alone review your application and make the decision to lend you money. Typically, the bank will sell your loan on the secondary market.”

As with any mortgage lender, there could be some potential risks. The con to a mortgage bank is having a limited choice.

“Mortgage bankers only offer their own programs. To comparison shop, you will need to speak with several lenders.

A mortgage broker acts as a middleman between the borrower and the mortgage products of many, many different lenders.

Mortgage brokers can be a good choice for a variety of reasons. They may get you a better deal on a loan because there are more products to choose from, and they will save you time shopping for a loan.

Also, they have access to thousands of different lenders so they are more likely to steer you in the direction of someone who will approve your application based on your financial information.

There are some risks to using a mortgage broker: “Hidden costs: Some mortgage brokers attempt to increase their profit by writing hidden costs into your loan. Best hedge- know the loan process and ask questions. Also, Professional oversight: Unlike mortgage bankers, mortgage brokers are not subject to licensing and regulations in all states.”

Now, many home builders and real estate agencies own their own mortgage company to make it easier to look for a house and finance one.

Internet lenders have obviously become increasingly popular and plentiful due to their easy access and simple marketing tactics. Many people have found it is very convenient to sit at home and shop around for mortgages on the computer, rather than visiting different brokers and banks in person or on the phone.

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