A first lien loan is the mortgage placed on the home before any other loans are taken out. It is usually the loan you use to buy the home and may be the largest loan on the home. The lender of a first lien loan has first claim on the home in the case of default.
There are several types of lenders who specialize in making loans on homes.
S&Ls and MSBs. These are savings and loan associations and mutual savings banks- depository institutions that offer checking and savings accounts and use the money to make loans. Most of these institutions also operate mortgage banking operations, which makes available to them a wider variety of loans they can keep sell.
Mortgage Bankers. “The mortgage bankers are the banks that specialize in real estate financing,” as clarified by Robert Irwin, author of the book Tips & Traps when Buying a Condo, Co-op, or Townhouse. These companies make loans and sell them to investors.
Mortgage Brokers. In her book, The Complete Guide to Becoming a Successful Mortgage Broker, Patricia Hughes defined mortgage brokers as “financial professionals who act as agent between borrowers looking for mortgages and the institutions that offer them,” These firms or financial professionals operate much like mortgage bankers. However, they do not use their own money to originate loans. Instead, they find the type of loan you want and originate the loan for the lender chosen.
Commercial Banks. Although banks specialize in short-term and business loans, they are becoming more active in home mortgages, particularly adjustable-rate loans.
Credit Unions. If you are a member of a credit union, you may be to get a mortgage loan from this source. Credit unions specialize in smaller, short-term loans but may offer some types of home loans.
Stockbrokers. If you have an account with a stock brokerage firm, you may be able to secure a mortgage there. Most stockbrokers, even discount brokers, offer mortgage loans.
Sellers. When buying a home, it is also possible to obtain financing from the seller, especially one who is anxious to move. The mortgage rate buyer and seller agree upon may represent a happy compromise between what the seller could earn on money in the bank and what the buyer would have to pay for borrowed funds.
Refinancing Options. If you are refinancing a first mortgage, you may want to check with the original lender first. As you consider your refinancing options, think carefully about your goals. What are you trying to do? Lower your monthly payment? Shorten the term of the loan? That’s important advice by Jason Rich, author of the book Mortgage and Refinancing.
The overwhelming predominance of mortgage loans originated has first-lien status, implying that a creditor would have first call on the proceeds of liquidation of the property if it were to be repossessed.
