Where Is Mortgage Money Coming From?

More and more people are turning to nonbank lenders for their mortgages when buying a house. A nonbank lender is a financial institution that does not offer both lending and depositing services, such as checking and savings accounts. Home Services Lending and Quicken Loans are examples of nonbank lenders.

Since the housing crisis, banks are more heavily regulated in terms of loan conditions. This naturally caused them to do less mortgage lending over time and allowed nonbank lenders to focus on less than perfect lending situations.

Back in 2011, 50% of all new home loan money came from the three big banks. As of 2016 that number has dropped to 21%. Banks are required to follow strict lending guidelines on what and who they can lend to. Their lending approach has changed from “risk management” to “perfect loan”. Meanwhile, nonbank lenders have a little more wiggle room in what they can offer.

Of course borrowers should pay more attention to things like mortgage rates and loan terms  than what type of lending institution they choose for their mortgage.

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