Understanding the different types of mortgage lenders. 

Depending on your financial situation, understanding the available types of mortgage lenders will help guide you towards the right lender.

What Is A Mortgage?

Mortgages are loans that are taken out by individuals to purchase a home. When taking out a mortgage, the borrower agrees to pay back the loan over a set period of time, usually a period of 15 or 30 years. Mortgages also typically involve interest, meaning that the borrower pays back more than the initial loan amount. In order to qualify for a mortgage, the borrower will usually need to provide proof of income, a credit score, and a down payment. Additionally, the borrower will need to be approved by the lender and may need to pay closing costs and other fees.

Why is knowing about different lenders important?

When you visit a lender or jump online to apply, it’s important to know what they can or cannot offer you. One lender may offer government loans while another may not. Some lenders don’t offer financing on mobile homes. You may have no interest in a mobile home but you get the point. Different lenders offer different products which is why this guide will help you choose the right one. Finding the right types of mortgage lenders see be easier with out guide below.

Here’s our list of the Types of Mortgage Lenders


A bank is a financial institution that offers services such as deposits, loans, payments and investments to its customers. Banks use money deposited by customers for investments and lending activities. Banks make a profit from the difference between the interest they earn from loans and the interest they pay to customers for deposits. Banks are the most common types of mortgage lenders.


  • You have an established relationship
  • Substantial deposits give you a clear path
  • All your accounts are in one place
  • Ability to walk in and apply
  • Existing customers may get discounts


  • Loan options may be limited
  • No shopping the best rates
  • Processing times can be slow
  • Tighter lending standards
  • Solicitation offers are never ending

Credit Unions

A credit union is a not-for-profit financial cooperative that is owned and controlled by its members. Credit unions offer members many of the same services as banks, such as savings accounts, loan products, and other financial services, but often with lower fees and interest rates. Credit unions are democratically operated, with each member having an equal vote in the decision-making process. These types of mortgage lenders require membership in the credit union.


  • Typically offer lower mortgage rates
  • More flexible terms
  • Personalized service and support
  • Lower closing costs than banks
  • They benefit the local economy


  • Restrictive eligibility requirements
  • Limited geographic coverage
  • Lower loan limits
  • Fewer loan options
  • Longer wait times for approval

Savings and Loan

A savings and loan is a financial institution that primarily takes deposits from customers and uses the funds to provide financing for homeowners and other borrowers. Savings and loans are key players in the mortgage market and offer a range of services, including savings plans, checking accounts, mortgages, home equity loans, and lines of credit. They typically pay higher interest rates on savings accounts than banks do.


  • Lower interest Rates
  • Flexible lending terms
  • Easier loan qualification
  • Personalized customer service
  • Fast loan processing


  • Limited loan options
  • Inflexible repayment terms
  • Strict credit requirements
  • Limited branch locations
  • Higher fees and closing costs

Government Lenders

Government lenders are financial institutions that provide loans to individuals and businesses backed by the federal government. These loans are typically made by approved lenders, such as banks, credit unions, and other private institutions, with the government assuming the risk of default. Government lenders can offer loans that may have more favorable interest rates and terms than those offered through private lenders. These types of mortgage lenders will offer less restrictive guidelines.

Some of the names associated are Fannie Mae, Freddie Mac, HUD, FHA and VA. It’s important to note the VA only allows mortgages for Military personnel and their families, both active and retired.


  • Flexible qualification for lower credit scores/income levels
  • Multiple loan options
  • Lower down payments
  • Lenient debt-to-income ratio requirements
  • Longer repayment terms


  • Higher interest rates than conventional loans
  • Borrowing restrictions such as loan limits
  • Lengthy process
  • Limited options for repayment and refinancing
  • Complex mortgage regulations

Mortgage Bankers

A mortgage banker is a financial institution that lends funds to individuals and businesses to purchase real estate. Mortgage bankers use their own funds to originate mortgages and typically do not sell the mortgages they originate, but instead hold them in their portfolio or may package and sell them to investors as mortgage-backed securities.


  • Expertise in their field and can provide customized advice about the best mortgage for your unique situation.
  • A mortgage banker can often negotiate better terms with lenders than what you could achieve on your own, resulting in significant cost savings.
  • Mortgage bankers can often provide faster turnaround times than going through a traditional bank.
  • Most mortgage bankers are local and are more accessible than larger national institutions


  • Higher loan costs due to additional fees charged by the lender.
  • Limited borrowing options since they are only able to offer mortgages from their own lender.
  • Potentially slower closing process due to the extra paperwork required from a third-party lender.
  • Less transparency on loan terms and conditions since the lender controls the process. 

Mortgage Brokers

A mortgage broker is a professional who acts as an intermediary between borrowers and lenders to arrange loans for property purchases. Mortgage brokers research loan products from multiple lenders, present loan options to their clients, and facilitate the loan application process.


  • A mortgage broker has access to many different lenders, which increases the chance of getting the best mortgage rate and terms.
  • Mortgage brokers are experts in the home loan market who can provide essential advice and support throughout the entire process.
  • Cost and Time Savings: Mortgage brokers take the time to handle all the paperwork, provide personalized service and negotiate with lenders on your behalf.
  • A mortgage broker will provide you with an unbiased opinion and objective advice when it comes to your home loan, as they are not associated with any particular lender.


  • Mortgage brokers may charge higher fees than banks.
  • It can be difficult to find honest and reputable mortgage brokers who have your best interests at heart.
  • Mortgage brokers may not have access to loan products from all lenders, which could stop you from getting the best deal.
  • Mortgage brokers may use unethical sales tactics to push a certain product or service. 
  • They may not be up to date on all of the latest rules and regulations regarding mortgages.
  • Working with a mortgage broker could take longer as they must wait for approval from lenders.

Private Lenders

Private lenders are individuals or organizations that provide financing options outside of traditional banking institutions. They typically offer short-term loans with higher interest rates than what is available through banks and other financial institutions. Private lenders may also be referred to as private money lenders, hard money lenders, or bridge lenders. They offer an alternative form of financing for a variety of circumstances, such as when traditional financing is not available or when a quick turnaround is needed.


  • Private lenders are often able to provide capital much quicker than conventional lenders.
  • Private lenders are more likely to have flexible repayment plans that can be tailored to the specific individuals or business needs.
  • Private lenders are less likely to have restrictions on how the money is used, allowing for greater flexibility.
  • Private lenders are not regulated by the government, offering less stringent regulations.


  • Private lenders often charge higher interest rates compared to traditional financial institutions, putting the borrower at a disadvantage.
  • The loan products offered by private lenders are generally more limited than what’s available through traditional lenders.
  • Private lenders are generally less flexible with their lending rules and guidelines, making it harder for borrowers with unique financial circumstances to qualify for a loan.
  • Private lenders don’t always share all of their fees and charges in advance, leaving borrowers in the dark about how much they’ll pay on their loans.
  • Due to stricter lending requirements, it can be difficult for some borrowers to qualify for loans from private lenders.

Hard Money Lenders

A hard money lender is a non-bank private lender who typically offers short-term loans based on real estate assets as collateral. These lenders charge high interest rates and fees in exchange for fast and easy access to capital. Hard money lenders are often used by real estate investors when they need to close deals quickly. These types of mortgage lenders usually charge higher interest rates.


  • Hard money lenders provide funds quickly, typically within a few days. Borrowers benefit from the speed with which they can access the funds for investments.
  • The documentation requirements for hard money loans are much lower than those for traditional loans. This means borrowers can get the money more quickly without having to go through the same exhaustive process that is required with traditional loans.
  • Hard money lenders typically accept lower credit scores than traditional lenders. This makes it an attractive option for borrowers who may not qualify for traditional financing.
  • Hard money loans are available with flexible terms, such as interest only payments and


  • Hard money lenders typically charge higher interest rates than traditional lenders due to the higher risk they are taking.
  • Most hard money loans have a loan term of one year or less and require full repayment at the end of the term.
  • In addition to higher interest rates, hard money lenders also charge high fees for their services. This can include origination, appraisal, and other closing costs.
  • Hard money lenders are not as widely available as traditional lenders, making it difficult to find one in your area.
  • Lower loan to value (LTV). Due to the risk hard money lenders will only offer lower loan to value.

Online Lenders

Online lenders are companies that offer loans and other financial services via their websites or mobile applications. These companies use technology to automate the lending process, offering consumers a faster and more convenient way to access cash. Online lenders can provide personal loans, student loans, business loans, and other types of financing.


  • Online lenders usually have a much faster processing time than traditional banks, allowing you to get approved and receive funds quickly.
  • With many online lenders, you won’t be required to put up any collateral to receive a loan.
  • Online lenders are more likely to work with those who have lower credit scores than traditional banks.
  • Interest rates with online lenders can be more flexible, sometimes featuring no prepayment penalties or even variable interest rates.
  • With online lenders, the application process is often much simpler and easier to understand than with traditional banks.


  • Online lenders often have higher interest rates than traditional banks, which can lead to increased costs for borrowers over time.
  • The lack of physical locations and face-to-face interactions with loan officers can make it difficult to navigate the process if you have questions or need personalized guidance.
  • Online lenders usually offer fewer loan options than traditional banks, so you may have to settle for an option that doesn’t meet your exact needs.
  • With online lending still in its infancy, borrowers should take extra care when researching a lender to make sure that it is legitimate and not part of a scam.

Fintech Lenders

A fintech lender is a type of financial technology company that provides digital lending services through the use of advanced software and analytics. Fintech lenders typically offer consumer loans and other financial products and services that may not be available through traditional banking channels. They usually focus on making the entire lending process faster and more convenient for customers.


  • Fintech lenders are often able to offer loan approvals and disbursements faster than traditional banks, which makes them a great option for businesses that need quick access to funding.
  • Since fintech lenders operate at a digital level and are not tied to the same regulations as traditional banks, they are often able to offer lower fees and interest rates.
  • Easier applications and automated processes: The application process is often much easier and more streamlined with fintech lenders. Automated processes also make it easier to track progress and follow up on any outstanding issues.
  • Fintech lenders typically offer flexible repayment terms and loan products.


  • Fintech lenders often use advanced technology and cloud computing to process and store customer data, which can put sensitive information at risk of access by unauthorized parties.
  • As fintech lenders become more popular, governments may start imposing regulations to ensure that customers are properly protected.
  • Fintech lenders typically offer relatively short-term loans with high interest rates, so customers may be more likely to default if they face financial hardship.
  • Fintech lenders tend to operate mainly in urban areas, so those living in rural or remote areas may not have access to this type of financing.
  • Customers may have difficulty getting the personal service they need.

Portfolio Lenders

A portfolio lender is a type of lender that originates and holds the loans they have issued in their own loan portfolio instead of selling them on the secondary mortgage market. This type of lender typically offers more flexible terms and lower interest rates to borrowers, as they don’t have to rely on external investors to purchase the loans they issue.


  • Portfolio lenders have more flexibility in lending guidelines, allowing them to work with less traditional borrowers, including those with a lower credit score or a higher DTI ratio than what is typically accepted by traditional lenders.
  • Portfolio lenders often offer competitive rates and terms when compared to other lending products, making them a great option for borrowers looking for a lower rate or longer term.
  • Portfolio lenders are typically more willing to look at each borrower’s individual situation and financial history, as opposed to relying solely on credit score or debt-to-income ratios to make a decision.
  • Portfolio lenders often have an expedited approval process, making it easier and faster to get approved for a loan.


  • Portfolio lenders often charge higher interest rates on loans than banks or other conventional lending institutions.
  • Portfolio lenders are not as widely available as traditional lenders and may only operate in certain regions.
  • Portfolio lenders have more rigorous and restrictive requirements for creditworthiness, down payments, and other factors.
  • It might be difficult to obtain funds or additional financing from a portfolio lender due to a lack of liquidity and minimal access to secondary markets.


What types of mortgage lenders are used for bad credit? It depends on your actual credit scores, sub -prime lender will lend on lower FICO scores. What types of mortgage lenders should a first-time homebuyer use? First-time homebuyers, should first evaluate their specific situation and refer to the “first time homebuyer guide”. What types of mortgage lenders are used for vacation homes? Most lenders will offer this type of product with varying rates and terms. What types of mortgage lenders are used for investment properties? Typical lenders, banks etc. can be used but more recently NON-QM lenders have offered easier ways to qualify for investment properties. They do come with higher rates.