There is a wide variety of potential lenders to choose from when shopping for a mortgage. Which one is right for you?

Mortgage Banks

A mortgage bank is a direct lender; the bank alone reviews your application and makes the decision to lend you money.

The benefits include; reliability, you probably know and trust your local mortgage bank and they are regulated by state and federal agencies. You deal directly with the source of your loan for one-stop shopping. There is the added possibility of savings, since the bank may offer you better terms or lower processing costs, based on your assets on deposit with the bank. Generally, the bank may process your loan faster than other providers.

The down side is that you have limited choices; Mortgage banks only offer their programs. To comparison shop, you will need to speak with several different Mortgage banks.

Mortgage Brokers

A mortgage broker is an agent who may represent the mortgage products of hundreds of different lenders. The broker's goal is to match you up with the loan product that best meets your needs at the best price. Once your loan is approved, you will usually deal directly with the loan originator or their mortgage service provider.

The benefits include; shopping across a range of different programs and lenders, a mortgage broker may find you a better fit and lower loan rate than a mortgage bank. Additionally, the broker can best steer you to the national or regional lenders that are most likely to accept your application based on your financial and personal information. The broker saves you time shopping for a loan. However, mortgage brokers are not subject to licensing and regulation in all states (both Maryland and Arizona require licensing for Mortgage Brokers) and there is the possibility that they will attempt to increase their profit by writing hidden costs into your loan. Make sure you question all of the charges.

Banks, Thrifts and Credit Unions

Most financial institutions offer a limited menu of loan products just as mortgage banks do. You may get a better rate if you already have an account with the bank or credit union. The pros and cons are similar to the Mortgage Banks.

Home Builders and Real Estate Agencies

Many large home builders and real estate agencies now own their own on-site mortgage company to make it easier to buy their properties. These affiliated companies may operate as a mortgage banker or broker. Make sure you find out if they are a broker or banker so you can understand how the programs work.

Internet Lenders

Mortgage lenders have proliferated on the Internet in recent years, offering fast, easy loans at competitive rates. Some are online channels of brick-and-mortar financial institutions or mortgage brokers; others are Internet-based banks or brokers. There are plenty of attractive deals online, but first make sure you're dealing with a reliable broker or lender.