Questions Every Borrower Should Ask the Lender
January 16, 2008
Since there has been so much media reporting on the increase in foreclosures and the placing of blame on the mortgage industry for not properly informing borrowers about the terms and conditions of the loans being written, I thought it might be helpful to offer potential borrowers a list of appropriate questions to ask when interviewing a lender. It has occurred to me that the blog would be much too lengthy to cite all the questions at one time. Because I think these questions should be helpful, I shall spread the questions over several blogs.
1. Finding out the type of lender represented by the loan agent to whom you are speaking can be a first step. "Do you represent a mortgage broker, a mortgage banker, or a financial institution?"
This is a great question, but my suspicion is the ordinary borrower may not know the difference.
Mortgage Brokers - take applications and process loan packages but place them with wholesale lenders for underwriting approval and funding.
Mortgage Bankers - are licensed by the state and make loans directly to consumers using funds from the secondary market such as Freddie Mac and Fannie Mae. A mortgage bank is a non-depository institution and does not receive funds or income from depositors.
Financial Institution - Generally is a lender that is licensed by the state or federal government. Banks and Savings and Loans are in this category. They can process the entire mortgage including accepting applications, processing the application, underwriting and funding the loans.
In today's real estate mortgage market, mortgage brokers do the major share of
real estate loans. Their advantage to the borrower is that they will shop for the wholesale funder that offers the best rates and terms.
2. If choosing a mortgage broker, ask: "Are you licensed by the state?" As a consumer, you can contact the Department of Corporations (http://www.corp.ca.gov/ or the Department of Real Estate (http://www.dre.ca.gov/) to make sure the mortgage broker is properly licensed. A mortgage broker's ads must contain the license number.
3. How long have you been in business? If the mortgage broker has been in business more that 5 or 6 years, you can have some assurance that they are knowledgeable about the lending business.
Knowing that you are dealing with a reputable company is the first step to take in selecting your lender.
Tomorrow I will suggest the questions you should ask the lender regarding your particular loan.
Since there has been so much media reporting on the increase in foreclosures and the placing of blame on the mortgage industry for not properly informing borrowers about the terms and conditions of the loans being written, I thought it might be helpful to offer potential borrowers a list of appropriate questions to ask when interviewing a lender. It has occurred to me that the blog would be much too lengthy to cite all the questions at one time. Because I think these questions should be helpful, I shall spread the questions over several blogs.
1. Finding out the type of lender represented by the loan agent to whom you are speaking can be a first step. "Do you represent a mortgage broker, a mortgage banker, or a financial institution?"
This is a great question, but my suspicion is the ordinary borrower may not know the difference.
Mortgage Brokers - take applications and process loan packages but place them with wholesale lenders for underwriting approval and funding.
Mortgage Bankers - are licensed by the state and make loans directly to consumers using funds from the secondary market such as Freddie Mac and Fannie Mae. A mortgage bank is a non-depository institution and does not receive funds or income from depositors.
Financial Institution - Generally is a lender that is licensed by the state or federal government. Banks and Savings and Loans are in this category. They can process the entire mortgage including accepting applications, processing the application, underwriting and funding the loans.
In today's real estate mortgage market, mortgage brokers do the major share of
real estate loans. Their advantage to the borrower is that they will shop for the wholesale funder that offers the best rates and terms.
2. If choosing a mortgage broker, ask: "Are you licensed by the state?" As a consumer, you can contact the Department of Corporations (http://www.corp.ca.gov/ or the Department of Real Estate (http://www.dre.ca.gov/) to make sure the mortgage broker is properly licensed. A mortgage broker's ads must contain the license number.
3. How long have you been in business? If the mortgage broker has been in business more that 5 or 6 years, you can have some assurance that they are knowledgeable about the lending business.
Knowing that you are dealing with a reputable company is the first step to take in selecting your lender.
Tomorrow I will suggest the questions you should ask the lender regarding your particular loan.
posted by shirley harry at 10:13 AM
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