06/17/2010 Mortgage lenders provide people with loans in the amount needed to purchase primary residences and investment properties. They also provide cash that can be used for a variety of purposes to existing homeowners who have built up equity in their homes. Although they're a key component of the economy, most people are unfamiliar with a mortgage lender's role. That unfamiliarity can make the lending process more stressful. Knowing more about mortgage lenders and the mortgage process can enhance a borrower's experience.
What do mortgage companies do? Making loans against property is what mortgage companies do. They provide loans to prospective homebuyers for a new home purchase and to existing homeowners who want perform a home loan refinance a home loans. They operate under the guidance of various federally-mandated regulations when processing mortgage loan applications. These regulations were created to protect borrowers. Among the most important are the Real Estate Settlement Procedures Act and the Truth in Lending Act. Mortgage companies work primarily with single-and multi-family residential properties (up to four units) and offer creditworthy borrowers a variety of new purchase and refinance mortgage loan options such as FHA home loans and conventional home loans. The variety enables borrowers to choose loan terms that make the most financial sense for their particular situation.
How long does the process take? In a normal market, the mortgage process from application to closing takes about a month. In hot markets, the process can take double that amount of time. Because there's usually a contractual deadline involved in new home purchases, lenders prioritize these applications over refinance applications. Homeowners looking to save money by lowering their interest rates or cash out equity aren't bound by deadlines. That's why processing refinance mortgages will almost always take longer, regardless of market conditions.
Broker versus loan officer Borrowers have the option of working with a mortgage broker or loan officer. Brokers have relationships with a network of lenders enabling them to offer borrowers a broader range of mortgage options. Brokers help educate borrowers on their options, and handle all the paperwork once a mortgage program is chosen. Brokers choose lenders they feel offer borrowers the best chance of mortgage approval. A loan officer works directly for a bank and can only offer borrowers the mortgage programs offered by that particular bank. While mortgage options may be more limited, banks can typically offer better rates. Beware the predators Unfortunately, not all mortgage lenders have the borrower's best interests in mind. These so-called predatory lenders are in business to make big profits and do so by steering borrowers into more expensive mortgages. Borrowers can protect themselves by checking the APR listed on their Good Faith Estimates. APR expresses a mortgage loan's actual costs.
