The mortgage lender begins the loan analysis procedure by looking at the property and the proposed financing. Using the property address and legal description, an appraiser is assigned to prepare an appraisal of the property and a title search is ordered. These steps are taken to determine the fair market value of the property and the condition of title. In the event of default, this is the collateral the lender must fall back upon to recover the loan.
If the loan request is in connection with a purchase, rather than the refinancing of an existing property, the mortgage lender will know the purchase price. As a rule, home loans are made on the basis of the appraised value or purchase price, whichever is lower. If the appraised value is lower than the purchase price, the usual procedure is to require the buyer to make a larger cash down payment. The mortgage lender does not want to over-loan simply because the buyer overpaid for the property.
The year the home was built is useful in setting the loan’s maturity date. The idea is that the length of the home loan should not outlast the remaining economic life of the structure serving as collateral. Note however, chronological age is only part of this decision because age must be considered in light of the upkeep and repair of the structure and its construction quality.
“Mortgage Broker Refinancing” – Mortgage brokers can be an excellent resource for helping you find the best mortgage loan; however, you have to watch them like a hawk to avoid overpaying for the new mortgage loan. Mortgage brokers are required to disclose all their fees and retail markup of your mortgage due to the Real Estate Settlement Procedures Act (RESPA); however, they have clever ways of disguising these fees.
How can you outsmart your mortgage broker? The first thing you need to do is ensure you are working with an actual mortgage broker and not a broker-bank. Broker-banks are simply banks pretending to be mortgage brokers and should be avoided due to loopholes in the RESPA legislation. To ensure your mortgage broker is actually a mortgage broker and not a bank, ask the mortgage broker if they close on the loan in their own name. If the answer is “No” and they close in the name of the wholesale lender, you know that you actually have a mortgage broker and not a bank.
Tell your mortgage broker that you will pay 1-1.5% origination and processing fees. Inform the mortgage broker that you will not pay Yield Spread Premium in any form. Tell the mortgage broker you will pay the closing costs including third party charges but zero markup by the mortgage broker’s company. Carefully comparing mortgage loans using the Good Faith Estimate and HUD-1 statement will help you find the most competitive loan offer. By watching your mortgage broker like a hawk and standing firm on the fees you pay, you will have out-witted your mortgage broker.
