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All over the world people buy homes or invest in real estate by taking mortgage
loans. Banks, financial institutions, insurance companies, credit unions, and
mortgage bankers offer individuals a large number of options for home loans. In
each case, the term of the loan, the interest rate, and so on fluctuate based on
changing financial market conditions and a real estate boom.
Most home loans or mortgages are standardized to comply with rules formulated by
government bodies known as The Federal National Mortgage Association, the Federal
Home Loan Mortgage Corporation, and the Government National Mortgage Association.
In the olden days the bank or institution you borrowed from lent the money from
their own pool of funds. Today the system has changed. Most home loans come from
three major institutions:
• The Federal National Mortgage Association.
• The Federal Home Loan Mortgage Corporation.
• The Government National Mortgage Association.
The place you apply for a loan is just the service provider the actual loan is
owned by one of the three above. The service provider pools many loans and sells
them to one of the big three and just earns a regular fee for taking care of your
loan. The big three in turn use the loan parcels and form mortgage backed securities
that are sold on Wall Street to generate more funds. Examples of such securities are
“Ginnie Mae Bonds.” However there are exceptions, loans above USD 333,700 do not
conform to the guidelines established by the big three and such loans are known as
non-conforming loans which are backed by different investors.
Every financial service provider uses a loan origination process which begins with
receipt of a loan application and ends in the loan being sanctioned through an
agreement reached between the borrower and lender.
The process includes:
1. The application duly completed.
2. Validation of application and credit scoring of borrower.
3. Gathering of information from third parties such as land title authority
and insurance companies.
4. Risk analysis and pricing.
5. Underwriting procedures.
6. Completion of terms and conditions and signing of an agreement.
If you want the process to be smooth with no hitches you need to ensure:
That your application form is completed in full with all relevant documents
attached. Always request a mortgage consultant or the loan office at the lending
institution to check that you have completed all essential formalities.
Get a complete set of documents from the seller of the house and if possible
buy a property that has a clear title deed and no outstanding loan payments.
Get a credit report from an established agency and check the report for
errors and accuracy.
Prepare a detailed financial statement that establishes your ability to
pay back the loan. Attach copies of your tax returns.
Apply for a loan with a bank or finance company where you have an account
and on going relationship. When a lender knows you and is sure he can trust you the
machinery will move smoother.
Get a co-obligant for the mortgage with a good credit score and solid
financial standing.Apply for a loan that you can afford. Never ask for more than
you can pay back comfortably.
When applying for any loan or mortgage understanding the loan process will enable
you to complete the formalities much quicker.
About Author
Barry allen is a freelance writer for
Lowest Mortgage Rates , the premier
website to find Mortgage, mortgage lender, home mortgage, mortgage rates, mortgage
quotes, mortgage calculator, Mortgage Company, mortgage loans and many more.
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