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Refinance Mortgage Lender Options

Refinance Mortgage Lender Options

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

    It is important to realize that you have lender options when shop for a refinance. You can use these options to create competition for your refinance business and make sure you are getting the best loam terms. There are several types of mortgage lenders including banks, mortgage brokers, mortgage bankers, credit unions and private money lenders.

    • Banks such as local, regional or national banks, use their customer deposits to offer mortgages. Banks usually offer attractive loan terms, especially if you are an existing customer, but they tend to apply stricter qualification requirements and offer a more limited range of loan programs.
    • Mortgage brokers are not direct lenders, which means they work with a network of wholesale lenders to fund your loan. Because mortgage brokers have relationships with multiple funding lenders they are able to comparison shop on your behalf to find you the most attractive loan terms. Also, because mortgage brokers work with many lenders, they are usually able to offer a wider variety of mortgage programs. Mortgage brokers may not always offer the best terms but we recommend that you contact one when shopping lenders because of the unique benefits they provide.
    • Mortgage banks are direct lender which means they provide you the funds for your loan. Unlike traditional banks that offer deposits, credit cards and other financial products, the only product mortgage banks offer is mortgages. Depending on their size and scope, mortgage banks can offer highly attractive loan terms, potentially even better than terms offered by traditional banks. Borrowers are well served to get a loan quote from a mortgage bank.
    • Credit unions are another direct mortgage lender option borrowers should consider. While credit unions tend to specialize in home equity loans and lines of credit, many offer mortgages as well. Credit unions tend to focus on specific niches and may not provide the same breadth of loan programs as other lenders. You also are required to be a member of the credit union so you may be required to meet an eligibility requirement. The positive news for borrowers is that most credit unions are not for profit organizations which may allow them to offer better mortgage terms.
    • Private money lenders, also known as hard money lenders, are a non-traditional mortgage lender option. A private money lender uses capital from investors to provide mortgages and other loans to borrowers. Private money lenders focused on credit-challenged borrowers and niche loan programs. For example, if you have recently exited bankruptcy and cannot qualify for a mortgage with a traditional lender, you may be able to get a loan with a private money lender. Or if you need a fix and flip loan to buy a property to renovate, private money lenders may be a good option. Private money lenders charge significantly higher interest rates and fees than traditional lenders so borrowers should be sure to understand the extra cost involved with a private money loan.

    Use the FREEandCLEAR Lender Directory to search over 3,900 lenders by type.  


  • Each type of lender offers borrowers advantages and disadvantages. Some lenders offer more competitive mortgage rates while other lenders offer a wider range of mortgage programs. Some lenders offer more flexible qualification guidelines while different lenders work with credit-challenged borrowers. Because lenders have strengths and weaknesses, we recommend that borrowers contact different types of lenders to understand the refinance options available to them.

    The table below outlines your refinance lender options and their positive and negatives. Some lenders such as banks, mortgage bankers and credit unions are direct lenders, which means they lend you money directly for your mortgage, potentially allowing them to offer you a lower interest rate. Other lenders such as mortgage brokers do not fund mortgages directly but instead act as a personal mortgage shopper for borrowers and compare rates and fees from multiple funding lenders to find you the best loan terms, so you benefit from lender competition. Private money lenders charge the highest interest rates and fees and are used by borrowers who have poor credit, who are unable to qualify for a refinance with other types of lenders or who are seeking specialized loan programs. Review the table to learn what type of of lender best meets your refinance needs.

  • Mortgage Lender Options
    Lender Type Definition Example Pros Cons
    • Take deposits from customers and loan money to borrowers
    • Banks fund mortgages, which means they actually provide you the money for your mortgage
    • They may keep your mortgage or sell it to a third party in the secondary mortgage market
    • Wells Fargo
    • Bank of America
    • Chase
    • Direct lender
    • May be more difficult to qualify for mortgage
    Mortgage Broker
    • Personal Mortgage Shopper
    • Work with multiple lenders to offer borrower the best mortgage product
    • Also referred to as third party originators
    • Do not fund loans but work with a number of funding lenders
    • Typically smaller, local companies
    • Compare mortgage offers from multiple, competing lenders
    • Does not fund loans
    • May not offer better mortgage terms
    Mortgage Banker
    • Originates and funds mortgages using a corporate line of credit
    • Does not take deposits from consumers
    • Sells all loans into secondary mortgage market
    • Quicken Loans
    • Direct Lender
    • Alternative to using a bank
    • May have limited resources
    • May not offer better mortgage terms
    Credit Union
    • Takes deposits from customers and loans money to borrowers
    • Typically not for profit institutions which may allow them to offer more competitive mortgage rates
    • You must be a member to obtain a mortgage from a credit union
    • Membership eligibility may require employment with a specific organization (active military, etc.)
    • Typically sells loans into secondary mortgage market
    • Navy Federal Credit Union
    • State Employees Credit Union
    • Potentially lower rates and fees because of not for profit status
    • May need to meet eligibility requirement
    Private Investors
    • Individual investors who offer mortgages to borrowers
    • Typically require low Loan-to-Value ratios and charge higher interest rates
    • Typically used by individuals with poor credit histories
    • Individual investors
    • Access to mortgage when no other options exist
    • More expensive type of mortgage financing
  • You should treat the refinance process like you would any other major purchase, such as buying a car – shop around, compare proposals from multiple lenders and negotiate the best terms for your refinance.  In addition to speaking with your current lender, we highly recommend that you speak to several lenders when shopping for your refinance including different types of lenders.  There is almost never any unique advantage to refinancing with your current lender – select the lender that offers you the lowest combination of mortgage rate and closing costs.  It takes more time to compare lender proposals but spending an extra hour or two shopping your refinance can save you thousands of dollars over the life of your loan.

    The table below shows refinance rates and closing fees for leading lenders. We recommend that you contact multiple lenders in the table to find the best loan terms. Comparing mortgage proposals is the best way to save money when you refinance.

  • %
    Current Refinance Mortgage Rates as of January 23, 2019
    • Lender
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    • Rate
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    Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click here for more information on rates and product details.
  • Review our video tutorial to learn more about your refinance lender options.

  • FREEandCLEAR Mortgage Instructional Video

    Mortgage Lender Options Instructional Video

  • Sources

    Lender Options:

About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael


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