Have you ever wondered who are the real companies which provide the capital to fund your mortgage. Let’s take a moment to learn what different type companies are in the business of real estate mortgages:
Savings Associations are the largest single source of residential real estate lending.
Commercial Banks usually attract demand deposits (checking accounts) and make short term loans primarily to businesses. They are generally not agood source for long term mortgage loans.
Mutual Savings Banks are probably less known than savings associations and commercial banks. Mutual saving banks number less than 1000 and aregenerally concentrated on the Northeast Coast. These entities are active investors in FHA and VA loans.
Mortgage Bankers a type of mortgage company, represent funding sources such as life insurance companies and pension investors. Mortgage Bankers locate borrowers who meet the qualifications of the loan investor, close theloans and then service the loans.
Mortgage Brokers, through a mortgage brokerage business, match borrowers with investors/lenders. Pursuant to a mortgage brokerage agreement, the borrower agrees to pay the mortgage brokerage business a fee. The mortgage broker represents the borrower.
Credit Unions & Pension Funds were prevented by Federal Regulations from making mortgage loans until 1978. Since then they have slowly increased their participation in the mortgage market. Pension funds have traditionally invested their money in high grade corporate and government funds and stocks. Inrecent years, they have begun to put more of their funds into real estate loans.
Life Insurance Companies invest the premiums paid by the policy holders. They are in an excellent position to invest money in long term investments such as real estate. Their major interest however, is in commercial financing for projects such as large apartment complexes, shopping centers or office buildings.
Sellers often finance a part or all of the sale of their own property. Seller financing is more common in periods of high interest rates. Regardless of lien position, when the property seller functions as a lender in a real estate transaction the resulting mortgage is called a “Purchase Money Mortgage” or “PMM”.
There we have it. Everything from Savings Associations to Life Insurance Companies to private individuals are in the business of lending money with real estate as collateral.
If you’re shopping for a mortgage, my platform as a broker is to obtain a wholesale rates, keep costs low and undercut retail offerings. Not that difficult, it’s all about service.
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