These trends are driving changes in the way people finance their homes, such as:
Where you go to get a mortgage loan: During much of the last century, most people went to specialized mortgage lending institutions such as savings and loan associations (aka thrift institutions) when they needed to buy a home. The government tried to nurture these institutions by protecting them from competition and giving them special advantages in how they raised money and how their income was taxed. This system broke down in the 1980s when wide swings in market interest rates and high loan failure rates doomed many thrifts.

The way these lenders operated was to take in deposits from individual savers and use them to make loans. During the 1980s, a national market for loans developed and the mortgage banker who originates and then sells the loans to investors became the primary source of home financing. Then in the 1990s, mortgage brokers agents who originate loans for a number of lenders became popular because they could often find the lowest-priced financing available.

Today, being able to gather information on a number of lenders and loan products and choose from among them is well established in the market place. The Internet allows individuals to compare the terms of a broad array of loans. For those who need more guidance, there are real and virtual mortgage brokers and bankers to help explain the options.

The move toward “one-stop shopping” is well under way. This concept allows a homebuyer to obtain financing and other purchase necessities in one convenient location. Many real estate brokerages have in-house mortgage operations to work with borrowers. In some cases, real estate agents can also help you select and apply for a loan without ever visiting a lender’s office.

What kind of loans you can get: In the 1980s, many different types of mortgage loans appeared, largely to cope with a high-inflation interest rate market. But these loans were basically created for the same type of borrower: those with good, established credit and enough cash to make a decent down payment. Today, almost anyone can buy a home thanks to a proliferation of loans designed for different kinds of borrowers. With very good credit, you may be able to borrow 100% of the purchase price. If you have poor credit, it is likely you can still secure a loan, albeit at a higher rate of interest. If you never bought a home before and do not have a credit record, there are a host of loans aimed at first-time homebuyers. Most of these loans feature low down payments and relaxed underwriting standards. For example, borrowers may get credit for a history of paying their rent on time.

How your loan is processed: In the past, waiting for loan approval was a long and nerve-racking experience for most homebuyers. In recent years, much of the loan underwriting process the procedure used to decide whether the loan should be made has been stream-lined, thanks to the greater ease with which information can be accessed and transferred. Many loans are approved using computer programs that can evaluate a good deal of information pertinent to the loan. Often, the result of the process is to compute a “credit score” that determines not only whether you receive the loan, but what type of loan it is and its terms. This means that loans can be approved faster, with less hassle to the applicant. Also, fewer loans are rejected since the use of credit scores relieves the strict “go/no-go” decision.

The modem mortgage market appears to develop new products wherever there is sufficient demand. When many homeowners refinanced their mortgages as inter­est rates were falling, lenders began offering loans with no discount points. These loans were very popular because they reduced the cost of refinancing. Now, no-point mortgages dominate the market for purchases as well as refinancing. For self employed borrowers and others who have trouble providing the kind of informa­tion needed for loan approval, or for those who need to get approved financing quickly, there are loans that require little or no documentation. There are also loans for borrowers who make low down payments but who want to avoid the requisite mortgage insurance.