Things You Should Know

Some mortgage sources are direct lenders, such as banks and mortgage banks. Usually banks or mortgage banks will be competitive with one or two loan products and will encourage their sales staff to sell these products to the consumer. Often banks will not even try to be competitive in rate, but will instead try to fill a niche, such as quick approvals or flexible underwriting of loans. Going directly to the bank or source was probably the way that our parents got their mortgage, but the trend has clearly steered away from such direct establishments and moved towards the Mortgage broker or "multi-lender sources," as Mortgage brokers are now being called on as one of the first choice for mortgage lending. Mortgage Brokers work with a large number of lending sources and offer these lenders products through a wholesale arrangement. The Mortgage Broker is compensated by an origination fee. Many banks that offer retail or wholesale loans will allow the Mortgage Broker to charge up to 7% of the loan amount for their compensation. By reducing this 7% fee, a Mortgage Broker can in most cases be more competitive than the retail side of the same bank.

Is there really a difference?    top

Direct lenders are captive to their own products. That is, they will not provide unbiased advice or selection, since by doing so they will possibly risk losing your loan to the company whose product truly provides you the best possible scenario. Mortgage Brokers, on the other hand usually sell a wide variety of products from their multiple lending sources, and can be objective in their recommendations. The compensation provided from one lender is equal to that from another lender, therefore the outcome of the recommendation doesn't matter. What does matter is giving you the best loan for your current financial situation. If you walk into your local bank or retail mortgage bank, they'll usually take your application. (warning: some times you will be charged a non-refundable application fee) Banks will underwrite your loan there, and lend their own money, If your loan is declined for any reason, you will need to begin the process again with someone else. By using a Mortgage Broker, your loan request may be reviewed by more than one lending source in the same time frame and sometimes in less time. Mortgage Broker sources do not use the same guidelines as an in house bank would, they believe if a loan makes sense then approving it should not be an issue. Now, we can give you an idea on the process of your loan application to make this a comfortable transaction for you.

Understanding The Process Of Your Application    top

Whether you walk into a bank or a Mortgage Broker meets you in your home, all lenders require an actual application. This is used to verify certain information, other information needed will include verification of income, employment, assets, and your credit history, Some of this information will be provided by you as part of your application process. For example, you will be requested to provide copies of W-2 forms for the past two years, current pay stubs for one month, and three bank statements for asset verification and for the purpose of showing some type of reserves, as well as any other information which we feel will help your loan request to be approved in a timely fashion. During this process, the lender will obtain a credit report directly from the credit bureaus, even if you have a current credit report on hand. The lenders will always verify this information independently. After the lender has reviewed this information, they will then order an appraisal and a legal description of the subject property. Most lenders work with approved appraisal companies. If you have a copy of an appraisal it may not necessarily be acceptable to the new lender, but can possibly be re-certified at a fraction of the cost of a new appraisal. Some people feel that if they are putting a large payment down they should not have to incur this cost, however, this is also done to protect you. Sometimes an appraisal may find the property is in need of repair or that the property is being sold for more than similar homes. In the case of a purchase, other inspections may also be required, but these are separate from the appraisal, and again this not only protects the lender but you as well.

What Are Conditions    top

Conditions are requests for additional documentation that the lender needs to complete your loan request, before a loan closing can take place. Many borrowers become frustrated by conditions that surface at the end of a loan transaction and can't understand why they are being raised so late. This is because the loan may go through several review processes prior to actual funding, and the final conditions are sometimes added after the loan documents have been signed by you. Just work with the lender and remember, the process is not perfect and the lender is simply trying to meet conditions imposed on them by others. Since most loans these days are sold and serviced by other parties, the lender must verify that the loan will be salable upon close. Whether or not you are serviced by your original mortgage lender or a new party shouldn't matter, your payment will simply be made to the new institution. No other terms of your loan can be changed after you have signed your final loan documents.
Did you know the majority of all mortgage loans are sold. You might continue paying your original lender and not even know that they just service your mortgage and that they no longer own it! While your loan request is being processed remember do not make any changes to your financial "picture" during this delicate time between approval and disbursements of funds. Believing that the "approval" is the final stage or that the lender won't find out about the change in debt or income or other factors can lead to real headaches. Simple mistakes range from applying for a new credit card, to purchasing a refrigerator for the new house, to buying a new automobile, to switching your job. These changes could cause a delay in your loan request and sometimes even require the lender to decline your loan. Most lenders will review credit just prior to a closing to assure no new debts were taken on and they sometimes re-verify employment the day of closing.

What Is The Recession Period    top

Once your loan closing takes place you will be given copies of all the documents that you signed, you will then have a period of three business days to review these documents. This is a good time to make sure nothing has changed since starting your loan request, and to make sure this new loan truly does make sense. A lot of people ask if the recession period can be waived. This was put in place to protect you. The only time that the recession period is not part of a loan transaction is, if you are purchasing a home or if the property you are refinancing is non-owner occupied.

Who Is The Best Source To Use    top

There are many ways to approach home-financing , beginning with the source that you choose to borrow from. The advantages of working with a Mortgage Broker or multi-lender platform are substantial and account for the shift from banks and direct lenders. Understanding the loan process can minimize the likelihood of frustration during the loan process. Remember to work with a source that has established itself as a company with integrity, and that is truly concerned with your needs, not just how much they can make from your loan. As a borrower, feeling comfortable with your lending source can eliminate all the stress from the loan process.