9 Handy Tips If You're Looking To Get A Mortgage Loan

A Guide In Getting Mortgage Loans

Looking for the right mortgage plan for your financial needs can be a challenging task, and before signing anything, you must first learn more about mortgages including all the related factors that you need to consider meticulously. By doing so, the entire process will go more smoothly for you. This initial phase is crucial, mainly if it's your first time to buy a property. The information that you'll find below will enlighten you about some essential points regarding the mortgage process, plus certain details will clarify some issues for you and will help in simplifying the mortgage application process.

1Know Who Manages Mortgage Loans

In general, banks handle most mortgage loans. Or at least, this is one of the main tasks of a banker. Still, getting a mortgage in real life is not like what you have probably seen in the movie "It's a Wonderful Life," wherein another individual's bank account was used by a person to get a housing loan. In reality, the mortgage money is customarily handled by either mortgage bankers or brokers. For loans, mortgage bankers usually use their own money.

On the other hand, mortgage brokers never use their personal funds for such. A mortgage banker may not use his own funds to manage your financing as well. Instead, he could borrow a certain amount or use his personal credit line. In case a mortgage banker borrows money to finance your loan, it's very likely that the funds will come from another mortgage banker.

2The Main Role Of Mortgage Bankers

In general, mortgage bankers directly lend their funds to borrowers. There are several kinds of mortgage bankers, including retail banks, traditional mortgage bankers, "net" branches or correspondent bankers, as well as credit unions. These are the usual banks where people encash checks, deposit money, or open checking or savings accounts. Nowadays, you can readily find retail banks in many places.

Apart from providing ATMs and credit cards, as well as student loans and other financial services, banks also offer a mortgage. The specialty of mortgage bankers is the issuance of mortgages. They don't handle or provide general consumer assistance. A mortgage banker also decides whether to sell your loan, or he can choose to keep and service the said loan.

3Credit Union Explained

A credit union and a retail bank are more or less the same; the most apparent difference between the two is that you need to become a member of the credit union for you to enjoy or access its benefits. Once you are a member of a credit union, you can obtain a savings or a checking account, as well as a loan similar to retail banks. As for a correspondent banker, this type of mortgage banker is somewhat the same to a broker.

"Correspondent banker" is also a term that's used to refer to smaller mortgage bankers since these are regional, not national institutions. These bankers can check out the different rates being offered by other correspondent mortgage lenders, that are also involved in either selling or purchasing loans. One advantage to a borrower here is that these lenders usually shop around and compare rates, similar to what a mortgage broker typically does, rather than simply setting a specific interest rate.

4Find A Reliable Mortgage Bankers

Mortgage bankers are quick to tell consumers that they are who they are, and they don't normally tell people that they are lenders, who will help you in finding the best rate that will suit your financial capability. More often than not, mortgage bankers have small-scale operations, and they don't generally provide service loans. If you want to get great rates and a better offer, go to regional mortgage bankers who also deal directly with other correspondent lenders. They can readily tell who will likely get approval or not and they also know when papers should be prepared and processed.

Regional mortgage bankers can offer a selection of varied programs, but their most important task is that they can help you get a better mortgage rate by shopping and comparing rates for you. As for net branches, these are also mortgage bankers. However, their operations are customarily smaller, and they are usually limited to working with managers, processors, and loan officers.

5Know What A Net Branch Is

The net branch is an entity that gathers all the net income that comes from the completion of a new mortgage loan. Net income is the result, once you deduct the overhead cost from the mortgage loan. In essence, net branches are closely linked to mortgage banking institutions.

The mortgage companies and net branches often have agreements, wherein a certain net branch will promise to use specific mortgage companies only to act as their loan creditors, and that they won't work with other mortgage lenders. Through this exclusive deal, the net branch will be able to access more credit lines and reduced lending fees, which it will not get if it weren't for the said agreement. Usually, it is the net branch that gets most of the profit from the transactions, but the net branch must also meet certain requirements, such as having a specific experience level, a specified net worth, as well as a reliable and robust credit profile.

6Loan Officers Opt For A Net Branch

A mortgage loan officer typically splits the income with the people or company he is working for, and he will likely realize soon that he will earn more if he works with a net branch instead. A good and smart mortgage broker can actually discover and establish a Net Branch that can work with both national and regional bankers, that are experts in this line of work. There aren't a lot of differences as regards such types of mortgage bankers.

Mortgages often have very similar characteristics. Actually, it's quite difficult for people to see the differences in the mortgage options offered by retail banks, and those that are provided by mortgage bankers or credit unions which also issue housing loans with broad and particular stipulations. The difference is not in the loan plans being offered, but in the business or entity that offers such loans, as well as the modes of operation of each institution.

7Responsibilities Of A Mortgage Broker

One of the main tasks of mortgage brokers is that they are the link between borrowers or clients and mortgage bankers. When a borrower makes a request, a broker organizes the mortgage financing instead of actually providing the loan himself. Only brokers can avail of the reduced interest rate, not the public. When it comes to products that are offered for sale, a large percentage of mortgage businesses in the U.S. have retail and wholesale sections.

To explain, mortgage brokers often obtain loans on a wholesale basis, which means that they will earn when they mark up the price as they offer these loans on retail. The brokers' money will then be paid via the wholesale division of brokers. It is common for mortgage bankers to work hand-in-hand with brokers, whose businesses also have wholesale departments in their companies that offer reduced mortgage rates to other mortgage brokers. The latter types of mortgage brokers operate smaller businesses as compared with bankers.

8Bankers Prefer Working With Brokers

Bankers prefer to work with brokers because the latter can provide more loans that have reduced overhead, since they are not required to have their own retail space, to pay employees, or to hire loan officers or processors. In other words, brokers manage their own overhead expenditures and staff, as well as pay all other related costs while also obtaining a much-reduced mortgage rate. It's often better to work with brokers instead of bankers because with the former you'll get lower fees and rates. Nevertheless, mortgage bankers play a huge role in maintaining rates low by joining the so-called competition in this industry. Thus, you have the option to pay them or have the wholesale lender pay them; or they can also benefit from both ways.

9How Much Does A Mortgage Banker Make?

There are currently no regulations regarding how much a mortgage broker must make during every transaction. The rule that they follow is this: earn as much as they can while also staying competitive. When you pay a broker, it is typically in the form of a mortgage broker fee, junk fee, or origination fee.

In case it is the wholesale lender that pays the broker, the payment is known as yield spread premium. This amount is based on the percentage of the total loan amount and the current interest rate. The higher the interest rate, the higher the yield spread premium or YSP. Thus, it also follows that a lower interest rate also means a reduced or maybe even zero YSP.

Before you do secure your home financing, you need to be fully aware of all options. You have now gained some understanding about what actually goes on during a mortgage loan proceeding, which has hopefully opened your eyes to all the choices in front of you. Keep in mind that you should get quotes from a couple of lenders first, compare rates, and do some research about the lender that you're interested in before actually signing a contract with one and getting a certain type of mortgage plan. With some smart and prudent planning, you'll really get a great deal!

About Author

Jackie Wing

Jackie Wing is an Alaska native, who enjoys snowboarding more than is probably socially acceptable. She lives in Anchorage with her two dogs Reese and Peanut, or as she likes to call them "Thing 1" and "Thing 2."