Mortgage Loans - How To Save Money By Knowing More About A Mortgage Company
By Dean Shainin
Before you decide on which mortgage company to provide your home loan, you need to know more about the inner workings and how they operate. This will enable you to know more about who you are dealing with, what loan packages they can offer, and the general terms of those packages. With some good basic information, you will be able to better understand what you can get, and if there are any issues that are not clear to you, you will be able to ask the right questions, all of which will enable you to decide if the loan is suitable for you.
Minimum Requirements of Mortgage Loans
It is important to note that the lender will stipulate minimum requirements on the funds used for mortgage loans, and in turn, the mortgage company is obliged to use follow these requirements.
The key lenders are Fannie Mae, Freddie Mac and Ginnie Mae. If the mortgage company is using these sources for the funds, then their requirements apply to the company’s loans. The FHA and VA insure loans also specify the requirements on loans they insure. If a mortgage company is using these programs, then they must comply with the specifications for these programs.
Federal and state laws have certain mortgage requirements too. The mortgage loan company is a middle-man and they are obliged to ensure that requirements in all directions of loan sources are met.
How is the percentage rate calculated? It is computed by adding some charges that the borrower has to pay back as a yield to the investor and is shown in the form of an increased interest rate.
Within the specifications of regulation Z on refinancing and second mortgage loans, there is a three-day waiting time after the loan closing before the money can be disbursed. This is called the borrower’s “right of recision”, and the borrower can change his mind and decide not to go through with the home loan deal. This is meant to give the borrower time to know the true annual percentage of the mortgage loan. In some situations, the home buyer may feel that things have been misrepresented to him. However, mortgage companies do not have such a right and they are obliged to conform to the loan agreement.
Buying a Commitment
Buying “forward commitments” on money to use for mortgage loans is what allows a mortgage company to stay in business. These commitments are purchased for a specific length of time. Sources for this money vary, and subject to the commitment, the mortgage company is obliged to fulfill the prerequisites of the lending source with respect to the movements in the interest rates. The mortgage company may be required to deliver the
loans to fill the commitment at the stated yield, even if the prevailing market rate is below that yield. Another option is a commitment that may alter to the present market rate.
Originating the Loan
The process of taking the mortgage loan application from the borrower, processing all papers and documents in order to obtain, and subsequently closing the loan is what is called “originating the loan.” A fee is charged by a mortgage company for this “originating,” although this fee generally covers only the cost involved. The origination fee is not a big money-making aspect of the mortgage loan business. The FHA and VA set the maximum amount that can be charged for the origination fee. If the mortgage loan money is sourced from a state or county bond, the maximum origination fee will most likely be predetermined.
Knowing how the mortgage companies operate is important because it will help you know who you are dealing with, and most importantly, decide what is best for you.