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Is a Mortgage Company a Lender?

The mortgage terminology may be a lot to take in, especially if you’re new to the home-buying process and everything that usually goes with it. It’s not a surprise many future homeowners wonder if terms such as lender or mortgage company are synonymous. So, is a mortgage company a lender?

Yes, a mortgage company is a lender in terms that it can be responsible for originating the mortgage. However, that doesn’t necessarily mean these companies fund and service loans – both of these actions can be outsourced to other companies. Still, it will not affect the original agreement that a borrower has made with a mortgage company.

 A person signing a mortgage deed

Learn everything you want to know about mortgage companies, lenders, and servicers in the following article.

Yes, a Mortgage Company is a Lender

A mortgage company is a financial institution that originates home-buying loans for different types of properties. Once the borrower gets the loan, it can be funded by these companies, but it’s not obligatory.

Moreover, keep in mind that many of these companies do not fund the originated mortgages. Rather than that, they simply seek suitable potential borrowers and originate the deal, which is then funded by one or several other financial institutions.

Therefore, in most cases, the capital a borrower gets for the loan doesn’t come directly from the chosen mortgage company. At the same time, the servicing (ongoing administration) is often transferred to loan servicing companies.

What Is the Role of a Mortgage Company in the Lending Process?

These companies should help you choose a loan that suits your possibilities and wishes and deal with your application process afterward. They are the entities responsible for processing and underwriting the loan, as well as preparing all the necessary loan documentation.

They are also responsible for closing the loan and making sure that the loan is final and the money is distributed. As for the funding of the loans, as mentioned earlier, it can be the obligation of your chosen lender or a third-party company that works with them.

The closing documents will indicate if your loan is being serviced by some other entity, or you’ll be informed after the loan closes.

What Kind of Home-Buying Loans Can a Mortgage Company Offer?

There are many different types of mortgages on the market, so borrowers can choose which ones suit their needs best. However, keep in mind that it’s on the individual mortgage company to decide which loans to offer.

Take a look at the table below and see the most common types of loans:

Type of mortgageFeatures
Thirty-year fixed-rate mortgageMost popular loan type since it offers lower monthly payments than other short-term loans. It also implies that the rate won’t change over time.
Fifteen-year fixed-rate mortgageBrings higher monthly payments but lower interest rates. It’s frequently used for refinancing.
Adjustable-rate mortgageThis implies a lower initial rate and monthly payments that can be locked for an agreed time. However, after that time expires, they can go up.
FHA loanIt is backed by the Federal Housing Administration and is meant for those with low credit scores.
VA loanInsured by the Department of Veterans Affairs, this loan comes with no down payments and mortgage insurance.
USDA loanThey are provided by the U.S. Department of Agriculture. However, they often have property value caps and income limits.
Jumbo loanGood choice for those who need higher mortgages. They, however, demand higher down payments and credit scores.

What Other Types of Lenders Are There?

Besides mortgage companies, you can also turn to banks since they can also offer mortgage lending services. Some of the best options are banks such as Chase, Bank of America, or, for example, Wells Fargo. Although you may be presented with some discounts and perks when choosing to borrow from a bank, you should expect longer closing times and higher interest rates than with mortgage companies.

On the other hand, you can choose to do business with credit unions, which are known to offer low loan rates. Still, you must first be eligible for a credit union membership – and many borrowers can’t meet the demanded requirements.

A building of the Bank of America

Is the Mortgage Company a Loan Servicer?

The mortgage company can be a loan servicer, but it’s usually not the case. While mortgage companies are there to originate the deal and, sometimes, fund the loan, the day-to-day administration is usually transferred to a third-party servicing company.

Once the mortgage is closed, it’s up to a servicer to take over the administration, which means they will be responsible for:

  • Taking payments and processing them,
  • Tracking the paid-off amount of your loan interest,
  • Taking care of escrow accounts,
  • Creating tax forms that detail the annual interest payments you made,
  • Processing different requests,
  • Initiating foreclosure if needed.

Is It Legal for Mortgage Companies to Sell Loans?

According to federal banking laws, mortgage companies and banks are permitted to sell your loan, as well as transfer the servicing responsibility and rights to other entities until a borrower pays off a mortgage lien. Some of the most popular loan companies, such as Rocket Mortgage, sell their loans. The borrower’s consent is not needed, but they must be notified about the transfer.

However, a new lender is not permitted to change the loan terms, interest rate, or balance, so a borrower is not, in any way, affected by this mortgage deed transfer. If your lender handed over the servicing rights, your obligations should not change, either.

A tiny house model next to coins, a calculator, and a mortgage deed

Make Sure You Research Mortgage Companies So You Can Choose the One That Fits You the Most

Once you start a home-buying process, you’ll be amazed at how many mortgage companies you can choose from. So, when choosing the right one, consider financial factors, such as interest rates, fees, and down payment requirements. At the same time, make sure a chosen lender offers the loan type you need.

Once you do find a company that meets your requirements, all you need to do is apply for a loan and wait for the approval.