Homeownership can feel overwhelming in the beginning. You go from renting and having a property management company who takes care of everything for you – from utilities to repairs – to being the owner of your property and having to navigate every problem and challenge yourself. Things get complicated fast. One matter that First-Time buyers often get confused about is the difference between a home lender and a mortgage servicer. Below, we’ve explained the matter in detail.
How Is a Mortgage Servicer Different from a Home Lender?
Home lenders and mortgage servicers play two different roles. Your lender is the one who financed your purchase when you bought your home. A mortgage servicer, on the other hand, is the company that handles all of your monthly mortgage payments.
Your mortgage lender might be your servicer for a short period of time after you close on your loan. However, this is likely to change. Many lenders choose to have another company service the loan because it’s more efficient and cost-effective. Therefore, your lender may transfer servicing rights to another company.
What Does a Home Lender Do?
Home lenders are institutions (such as banks or credit unions) that provide loans to people who want to buy a home. Home lenders check to see that borrowers are qualified for the loan they’re taking out. This means checking their credit, income, and financial history. During the purchase process, they also oversee the processing and underwriting of the loan.
What Does a Mortgage Servicer Do?
A mortgage servicer manages your mortgage after you’ve closed on your loan. They’re the company that takes all your payments, processes them, and sends you your monthly statements. Though you make one payment, often your payment goes towards paying multiple expenses, including your mortgage, PMI, homeowners insurance, and taxes. Servicers make sure that the money gets sent to the right places. Additionally, mortgage servicers may manage your escrow account and provide customer support. They are the ones who can help you if you have questions or concerns about your loan.
Why Did My Mortgage Servicer Change?
It’s not uncommon for mortgage servicers to change over the lifetime of a loan. Usually, this happens because your servicer has decided to sell the rights to service your loan.
Though it may sound unsettling to have someone new take over your mortgage payments, rest assured that this is something that happens all the time. Furthermore, your loan terms will not be affected by a change in servicing companies.
If you still have questions about the difference between a home lender and a mortgage servicer or would like to speak to an expert about another matter related to your mortgage, please do not hesitate to reach out.