Types of Lenders

In my previous post we discussed working with mortgage lenders and getting pre-approved. In this post we will talk about the different types of lenders, primarily mortgage brokers and direct lenders.

You mean there are different kinds of lenders? 

Yep! There are two types of mortgage lenders that are relevant to first-time home buyers – 1) mortgage brokers and 2) direct lenders (or mortgage bankers).

Mortgage Brokers – If you’ve ever shopped for car insurance, you probably realize that many insurance agents don’t just sell insurance policies for a single company. Instead, they take the information about your car and driving record, then they shop around with several insurance carriers to see who offers you the best rate and/or the best coverage. Mortgage brokers operate in a similar fashion – they take your loan application and then shop around for the best rate or the loan product that best meets your needs.

Direct Lenders / Mortgage Bankers – As you may have already guessed, direct lenders take a more…direct approach. They loan you money directly from their institution and may service your loan for its duration.

While one is not necessarily better than the other, mortgage brokers can streamline the process for you since they work with multiple lenders. Instead of completing loan applications for several lenders, you work with one broker and they help you decide what type of loan you best qualify for.

Ready to start shopping? Don’t miss the next post in this series, where I discuss different types of mortgage loans.


Rob Reed Realtor St Pete FLRob Reed is a REALTOR in St Petersburg, FL that specializes in working with first time home buyers.

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