7 FAQs on Mortgage Lenders

April 20, 2010

Author: William M. Davis

Having a good understanding of what makes a good mortgage lender is vital to you receiving the best mortgage loan. Mortgages are long-term investments and no one wants to be stuck in a bad deal for the next 25 years. To assess your mortgage lender there are certain things you should know. These include:

1. Who is a Mortgage Lender?

A mortgage lender is a financial organization that offers both prospective and existing homeowners the necessary financial backing to purchase new homes or refinance existing ones. For their part, borrowers are expected to honor their loan agreement by making the required monthly payments at an agreed interest rate over the life of the loan. The most popular forms of mortgage lenders are banks, mortgage brokers, building societies and credit unions.

2. Is there a difference between a mortgage broker and a mortgage lender?

There are many major differences between a mortgage lender and a mortgage broker. The mortgage broker is basically a middleman or agent for the mortgage lender. The mortgage broker is responsible for seeking out mortgage seekers, handling all their financial affairs and getting the best rate for the mortgage lender. Do not be fooled by ads that the broker acts in your best interest, they receive a throw back from the mortgage lender for every percentage point they gain on the base rate offered by the lender. On the other hand, mortgage lenders are the ones who provide the money to finance the home purchase.

3. What are mortgage lender fees?

Mortgage lender fees are costs that are associated with appraisals document preparation and the application process. As a general rule, these costs should not exceed 2 to 5 % of the cost of the loan.

4. What is the Truth Lending Act?

The truth lending acts is a mechanism under Federal Law that forces mortgage lenders to provide mortgage seekers with all information pertaining to the cost associated with their mortgage transaction. This prevents the many abuse cases that used to be reported by mortgage seekers.

5. How to choose the best Mortgage Lender?

Always begin with family and friends. These individuals are closest to you and should have your best interest at heart. Then shop around for the best complete package, not necessarily the cheapest interest rate, but those that offer support during times of difficulties. Always make a list from which you will eliminate the worst ones as you go along.

6. What do mortgage lenders need to approve my loan?

There are always a few things that a required for the speedy approval of you mortgage. Mortgage lenders will require a copy of your tax returns, a review of your debt ratio from an underwriter, an appraisal and a precise amount on the size loan that is needed.

7. How should mortgage lenders behave?

Mortgage lenders should communicate all aspects of mortgage loan procedure with clarity and honesty. They must give you an opportunity to ask questions about the big picture of your loan and the implications associated with it.