There are 3 basic types of institutions you can acquire a VA loan from - Banks, Mortgage Companies and Brokers. Brokers are are not lenders but do have a purpose. They can help by shopping your rate for you amongst several different investors saving you time doing it yourself.
One thing you may not know is the other two can do the same but in a different way and in most cases at less cost to you if the institution does enough business to pass savings on to their customers in lower rates and/or fees. Mortgage Companies (So called Mortgage Bankers) also can have several investors to shop your rate for you as well but the difference is they are the initial lender. They make the decisions for the investor and the investor eventually buys the loan from them allowing them to pay back their wholesale investors.
Banks too can do this but one of the major differences is, unlike mortgage companies that have to borrow the money at sometimes ridiculous double digit rates, banks lend their own money. Imagine, as a mortgage company, you've borrowed $10 Million at 14% interest and $5 Million of it you lent out at 5.5% but due to mistakes made on the loans, you can't sell that book of business off. How would you make up the loss? You would have to start charging more or offering higher rates. If a customer doesn't do enough research, they are the ones that pay.
Although banks are some of the most secure institutions to get your VA loan from, you need to do your research on them as well. If they portfolio their loans, they too can get themselves in trouble as well. They could be sitting on foreclosed properties costing them Millions in revenue. Guess who will ultimately have to pay? You guessed it. YOU. Although you might get a great deal on a foreclosed home through a large bank, but you might pay for it another way in a higher rate or fees.
One question you should always ask before making your final lender selection. Ask if the lender is a LAPP lender. L.A.P.P. stands for Lender Appraisal Processing Program. What this means is VA has authorized this lender to receive the appraisal directly from the appraiser to issue the NOV (Notice of Value). This speeds up your loan process tremendously as the lender does not have to wait for VA to do so. If not a LAPP lender, you can expect the appraisal process to take up to 2 weeks or more, which could jeopardize your loan closing on time and breach the purchase contract or even cause you to lose your rate lock. Always check if your lender is a LAPP lender. If they do not know, that might be a red flag.
Good luck with your search.
