MORTGAGE BROKERS

 

Purpose
Responsibility
Economics
Mortgage Types
Advantage
Steps
Summary

 

PURPOSE
The purpose of a Mortgage Broker is to secure funding for the homebuyer who is purchasing or refinancing a property.  The property can be either land, Single Family, Condominium, Townhouse, or multi units of 2, 3 or 4 units per property.  They also handle larger properties which would be classified as commercial property.

 

RESPONSIBILITY
They are responsible to gather information on both the property and client and package the information together to be presented to the bank or lending institution.  Before they do so, they need to research all the different types of mortgages available through each of the institutions to find the best program for the client’s particular needs. 

 

ECONOMICS
The Mortgage Broker should discuss with the client the cost of securing a mortgage with them.  They do so by presenting a Good Faith Estimate showing the appropriate costs broken out in a standard format.  This form is required by RESPA (Real Estate Settlements Procedures Act) and is given to the homebuyer within 3 days of application.  The costs vary by location mainly because of the government costs associated with closing a loan in each location.  As a rule of thumb, the total costs should fall between 4-6% for a standard sized loan, less for larger loans.  Please understand that these are only estimates and actual costs will be reflected on the HUD-1 at closing.  An efficient Mortgage Broker should have accurate closing costs to within 5% of the actual fees.

 

MORTGAGE TYPES
So many programs are available at one time or another, there is no real way of publishing all the programs available today, or tomorrow.  Each program has rules on each factor so it’s difficult to understand the process without the assistance of a professional.  Here is a list of categories you can choose from to give you an idea as to the number of programs available to you.

You need to pick one from each category

• Terms of loans can be 10 year, 15 year, 20 year, 25 year, 30 year, 40 year, 50 year
• FHA, VA, Conventional, Conforming, Non-Conforming, Construction (can be on your land or the contractors)
• First Mortgage, Second Mortgage, Home Equity (HELOCS), 80/20, 80/10/10 or any version that fits the scenario
• Fixed, Balloon, Arm:  1 month, 3 month, 6 month fixed/ARM; 1 year fixed/ARM;  2 year fixed/ARM; 3 year fixed/ARM; 5 year fixed/ARM; 7 year fixed/ARM; and  10 year fixed/ARM; Negative Amortization (all ARM rates may have 1, 3, 6, 12 month adjustments)
• First Time Homebuyer, Teacher Special, Special Assistance, Standard Homeowner, 2nd Home, Investment
• Property types:  SFR (Single Family Residence), Condo Lo-Rise, Condo Hi-Rise, Townhome, Duplex, Triplex, 4-plex, Co-op property, Condo-hotel
• Citizens, Non-Permanent Resident Aliens, Permanent Resident Aliens, Foreign Nationals

 

If you do not understand any of the terms, please check out our section GLOSSARY to find out what each means.  If you can’t find it in Glossary, ask one of the Mortgage professionals listed on our website.  Also we recommend you read The Mortgage Process.

 

ADVANTAGE
There are a number of reasons why you should use a professional Mortgage Broker.  First, Mortgage Brokers have more programs to offer than any bank.  This is due to the fact that each bank has separate programs to offer.  The Mortgage Broker can therefore utilize the best program for you by understanding what your needs are, and then shop for the best program through different lenders.  If you go to only one Bank/Lender, you are limiting yourself to the programs they offer.

 

STEPS

• Have a conversation with your Mortgage Broker and make sure they understand your needs.  They can not quote you an interest rate until you give them enough information to make that determination.  This means they need to know your Income, Credit, Mortgage or Rental history, and what is called in the industry, Loan (mortgage) to Value (appraisal).  In other words, if you are purchasing, how much money are you putting down on the property.
• They must pull your credit report.  You should  proceed only when you feel comfortable enough to work with the qualified Mortgage Broker.
• The Mortgage Broker then goes through the loan scenario with the banks they deal with to find the best program to fit your needs and at the best possible interest rate for the client.
• Next, the application needs to be completed and signed.  Never sign blank documents and Paperwork varies from person to person and state to state so be prepared.  You should ask questions throughout the process if you are unsure with any of the documents.  Basic forms that need to be signed are Application, Good Faith Estimate, Truth in Lending, Broker agreement, Borrower Authorization, and a number of disclosures.
• Additional documents will then be required to complete the transaction.  They will need 2 forms of identification, any Insurance papers for the property, a Survey of the property, Income documentation for 2 years, Asset documentation for at least 1 month (probably 2 months), and if you are refinancing, they will ask for the last mortgage statement.  There are other documents that may be required so your professional Mortgage Broker will give you a list of items that you will need for the process.
• Once the documents are collected, your file can be sent to the lender.  The 3 most important items they gather are your insurance documents with the new mortgagee clause added, an Appraisal on the property (this fee is collected from you at the time of the appraisal), and Title work through a registered Title Company.
• The package is now ready for the lender.
• When the lender reviews the package, they have a checklist of items they are required to go through to make sure it qualifies under their guidelines.  If any item is missing, they notify the Mortgage Broker of a list of conditions that need to be satisfied in order to get a “clear to close” on the file.
• Once the “clear to close” is issued, a date is negotiated and a package is sent to the closing department of the Title/escrow Company and they prepare a HUD-1 statement for the lender to approve.  The homebuyer will also receive a copy of the HUD-1 the day before closing so you can review it as well.
• At the day of closing, you meet with the “closer” and they make a positive identification of you (usually a Drivers License) and copy it for the file.  Then they explain each document and give a brief explanation of what you are signing.  Once the package is completely signed, they have to send the package back to the lender.
• At a purchase closing, the Escrow Company will receive the funds to be disbursed on the same day of closing.  On a refinance of your home, they will not disburse your funds because you have three days to review all the documents.  During this time, you have the right to cancel the loan by a form you were given at the closing.  If you refinanced a property that is an investment property, the funding is the same day… similar to a purchase.
• You should log back into this site and register your satisfaction of how well you are treated by each of the parties that helped you through the funding of the loan.  Remember to keep names, addresses and telephone numbers of everyone involved for your records for the future.

 

SUMMARY
Your professional Mortgage Broker plays a key role in securing a mortgage.  Their primary goal is to find a mortgage that fits your needs.  They are specially trained and have the expertise in knowing the programs of many banks.  They deal with numerous banks and lending institutions giving them a wider selection of programs from which to choose.  Their only goal is to get your deal funded with the best possible program available.  Locate one of our certified members by clicking above and choose one of them in your home town or where ever you may be relocating. 

Remember to come back and tell others how you were treated!