There are three major sources of mortgage loans: commercial banks, thrift institutions, and mortgage brokers. 

Commercial banks, typically known for their short term lending, have been increasing their presence in the mortgage arena in the last several years. By  developing a good standing relationship with your local bank, they may make a consorted effort to get you the best financing deal possible.

Thrift institutions include savings and loan associations and savings banks. They either use customers' deposits to make loans or sell loans to private investors. Typically, their loans are slightly more favorable than other sources due to business structure; however, the 1980's savings & loan failures have made many potential investors leery.

Lastly, mortgage brokers or bankers both solicit borrowers, originate loans, and place them with mortgage lenders such as life insurance companies. Mortgage brokers take loan applications  and then find lenders willing to grant the mortgage loans under the desired terms; thus, saving you time and the inconvenience of talking with several lenders yourself. Brokers typically pursue conventional loans for consumers. On the other hand, mortgage bankers deal primarily in government- insured/ guaranteed loans. Importantly, before working with a broker or banker, you should carefully investigate the firm and its reputation by checking with your local Better Business Bureau.

Applying for a Mortgage

One of the most critical steps in buying a home is obtaining the proper financing. There are many sources of mortgage loans, and you should begin investigating them while you are looking for your home. It may be helpful to meet with several mortgage lenders and prearrange for a mortgage loan. By pre- qualifying, you will know ahead of time the maximum mortgage loan amount you will be able to receive. Pre-qualification also provides estimates of the required down payment and closing costs for different types of mortgages. It also identifies in advance of purchase, problems including creditor errors or incorrect personal information, which can cause your loan to be denied.

When you apply for your loan the lender will usually request :

• proof of income (pay stubs or W-2 forms)
• debt balances (credit cards, car and school loans)
• financial assets statements (banking, investment)

Under the Equal Credit Opportunity Act, lenders may not discriminate against an applicant for a mortgage loan on the basis of race, color, religion, national origin, sex, marital status, or age, provided you meet the legal requirements for entering into a legal binding agreement. Nor can credit be denied because you receive public assistance .