Understanding the Process of Mortgage Lending

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Filed under: Qualifying for a Mortgage Loan

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Many people who are thinking about buying a home may not understand the importance of a lender and what a lender does. When that important time comes where you have made the decision to become a homebuyer, the first important step will be to contact a lender who will determine your eligibility.

Since most homebuyers are going to need some type of financing, the lender will play a vital role in the process of purchasing your home. Your lender is important because he or she will review your application and determine if you qualify for your loan based on your credit, income, and debt. In addition, at the closing of your home loan, your lender will issue you all of the documents you need. Keep in mind that depending on the type of loan you are looking for, you may need to select a lender from an approved list.

With this said, let’s look at the crucial role of mortgage lenders.

What types of lenders are there?

• Mortgage lenders include mortgage bankers, commercial banks, credit unions, thrift institutions, and private individuals.

Lenders and reviewing applications.

• The main goal for a mortgage lender is to determine who is a worthy candidate.
• Under the “ability to pay” rule, which was introduced in 2013 by the Consumer Financial Protection Bureau, lenders are required to verify your income, assets, employment status, debt, and other payment obligations before issuing a loan.
• The lender will also verify your credit, making sure it is in good standing and free from any delinquencies and charge-offs.

Lenders and Mandatory Disclosures.

• Lenders are required, under the Real Estate Settlement Procedures Act, to disclose specific information to you, the borrower.
• Lenders are required, within three business days of submitting a loan application, to provide you, the borrower, a ‘good faith’ estimate that will detail any anticipated settlement and service charges.
• This estimate will list you loan interest rate, fees charged by the lender, and the total cost you will pay over the life of the loan.
• Lenders are required, once your application is complete, to notify you within 30 days whether or not your loan has been approved.

What other duties do lenders have?

• Lenders are required to review the escrow account on your loan annually to make sure the proper amount is being impounded each month for your taxes and insurance.
• Lenders should send out a disclosure to you each year showing the prior year’s activity and any changes/adjustments to the account.
• If it should occur, lenders will also take necessary action if you, the borrower, fall behind in your agreement to make your monthly mortgage payment. This may include foreclosure alternatives such as a repayment plan, forbearance, loan modification, or short sale.

As you can see, your lender is an imperative part of the home buying process. If you are thinking about purchasing a home and have any questions about the process, please contact me and we can get you started in owning that dream home.

 

 

 

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