| Before you decide on which mortgage company to | | | | decide not to go through with the home loan deal. This |
| provide your home loan, you need to know more | | | | is meant to give the borrower time to know the true |
| about the inner workings and how they operate. This | | | | annual percentage of the mortgage loan. In some |
| will enable you to know more about who you are | | | | situations, the home buyer may feel that things have |
| dealing with, what loan packages they can offer, and | | | | been misrepresented to him. However, mortgage |
| the general terms of those packages. With some | | | | companies do not have such a right and they are |
| good basic information, you will be able to better | | | | obliged to conform to the loan agreement. |
| understand what you can get, and if there are any | | | | Buying a Commitment |
| issues that are not clear to you, you will be able to ask | | | | Buying "forward commitments" on money to use for |
| the right questions, all of which will enable you to | | | | mortgage loans is what allows a mortgage company |
| decide if the loan is suitable for you. | | | | to stay in business. These commitments are |
| Minimum Requirements of Mortgage Loans | | | | purchased for a specific length of time. Sources for |
| It is important to note that the lender will stipulate | | | | this money vary, and subject to the commitment, the |
| minimum requirements on the funds used for mortgage | | | | mortgage company is obliged to fulfill the prerequisites |
| loans, and in turn, the mortgage company is obliged to | | | | of the lending source with respect to the movements |
| use follow these requirements. | | | | in the interest rates. The mortgage company may be |
| The key lenders are Fannie Mae, Freddie Mac and | | | | required to deliver the loans to fill the commitment at |
| Ginnie Mae. If the mortgage company is using these | | | | the stated yield, even if the prevailing market rate is |
| sources for the funds, then their requirements apply to | | | | below that yield. Another option is a commitment that |
| the company's loans. The FHA and VA insure loans | | | | may alter to the present market rate. |
| also specify the requirements on loans they insure. If a | | | | Originating the Loan |
| mortgage company is using these programs, then they | | | | The process of taking the mortgage loan application |
| must comply with the specifications for these | | | | from the borrower, processing all papers and |
| programs. | | | | documents in order to obtain, and subsequently closing |
| Federal and state laws have certain mortgage | | | | the loan is what is called "originating the loan." A fee is |
| requirements too. The mortgage loan company is a | | | | charged by a mortgage company for this "originating," |
| middle-man and they are obliged to ensure that | | | | although this fee generally covers only the cost |
| requirements in all directions of loan sources are met. | | | | involved. The origination fee is not a big money-making |
| How is the percentage rate calculated? It is computed | | | | aspect of the mortgage loan business. The FHA and |
| by adding some charges that the borrower has to pay | | | | VA set the maximum amount that can be charged for |
| back as a yield to the investor and is shown in the | | | | the origination fee. If the mortgage loan money is |
| form of an increased interest rate. | | | | sourced from a state or county bond, the maximum |
| Within the specifications of regulation Z on refinancing | | | | origination fee will most likely be predetermined. |
| and second mortgage loans, there is a three-day | | | | Knowing how the mortgage companies operate is |
| waiting time after the loan closing before the money | | | | important because it will help you know who you are |
| can be disbursed. This is called the borrower's "right of | | | | dealing with, and most importantly, decide what is best |
| recision", and the borrower can change his mind and | | | | for you. |