Is There Really Any Difference Between Mortgage Lenders?

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By Credit.com

Is There Really Any Difference Between Mortgage Lenders? – Real Estate News and Advice – realtor.com

The Consumer Financial Protection Bureau has safeguards in place to make sure mortgage companies operate on a level playing field with consumers. The level playing field specifically has to do with rates, pricing, and whether borrowers are getting a fair and reasonable offer from one lender to another. But how banks look at your financial picture is something else entirely.

Here are some factors that impact how your mortgage company works and the deal you get on your mortgage.

What’s their relationship with Fannie Mae & Freddie Mac?

The relationship your mortgage company has with Fannie Mae and Freddie Mac carries significance in whether or not they can fund your loan even if it is slightly outside the box.

For example, if you’re dealing with a company that originates the loan through another source, and then ultimately that loan is sold on the secondary market, the mortgage originator may be more conservative in its product offering and underwriting. Simply put, the more hands touching the file, the more scrutiny that file is going to have when the loan ultimately is delivered to the end investor.

Are there investor overlays?

Some mortgage companies still have what are called investor overlays, which are additional constraints an individual mortgage company may have beyond what Fannie Mae and Freddie Mac deem acceptable as traditional underwriting standards. For example, some mortgage companies will not let you pay off debt to qualify while others do.

What products do they offer?

Not all lenders carry the same types of loans, and some have differing restrictions for some loan types. For example, the debt-to-income ratio can differ among lenders. If you have a DTI on a jumbo mortgage (a special kind of mortgage based on the amount of the loan) beyond 43%, some companies won’t work with you, while others will go as high as 49%. Another example could be an FHA loan with a credit score, say, at 600 versus one at 640. Some work with a 600 score, some do not. (You can check your credit scores for free on Credit.com to see where you stand.)

Is There Really Any Difference Between Mortgage Lenders? – Real Estate News and Advice – realtor.com

Where you get your mortgage is entirely up to you as a smart, well-informed consumer. Do not be fooled by a lender or mortgage company promising you the world just to get your business, only to find later on your loan has too many roadblocks or your financial picture does not meet the guidelines set forth by that company. Integrity in lending and helping consumers is quality you should look for when picking a reputable mortgage source.

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10 Questions to Expect From Your Mortgage Lender

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By: Craig Donofrio

Your lender won’t put you in an interview room and demand answers, but completing a loan application can feel like an interrogation. But you’ll sweat only if you don’t know the answers to these 10 key questions:

1. Where’s your proof of income?

You should have proof of about two years’ worth of income at the ready. Come prepared with pay stubs, copies of checks, paid independent contractor invoices, and other documents that verify your employment. Be sure to disclose any other sources of income, including child support or alimony.

2. What are your assets?

Your lender wants to know about any cash reserves you have. A balanced investment portfolio demonstrates that your investment planning and goals aren’t solely pinned on a home value appreciation. They’re also resources that can be tapped in an emergency in case you need money for a mortgage payment.

3. What are your outstanding debts?

In general, the more debt you have the less likely you are to get a mortgage. More debt also means you’ll likely have to pay a higher interest rate on the money you borrow. The debt-to-income ratio limit on most mortgages is 43%.

The debt-to-income ratio measures how much of your gross (before taxes) income is used to pay housing costs, including principal, interest, taxes, insurance, mortgage insurance (if applicable), and homeowners association fees (if applicable).

Other debt, including credit cards, student loans, and car loans, will also affect your debt-to-income ratio.

4. What’s your credit score?

You should already know this, because you should have already pulled your credit report and checked it. Before you approach a lender, get your credit score in the best shape possible by paying off debts and disputing any discrepancies on your report. Even if it takes extra time, it can save you thousands of dollars over the life of a loan. Get your free credit reports from AnnualCreditReport.com.

5. Now that you are about to close, how’s your credit again?

When it’s time to close, your lender will ensure you haven’t mucked up your credit or debt-to-income ratio. Your credit report will be pulled again to make sure you haven’t opened any new credit or added new debt.

From the moment you apply for a mortgage right up until closing, don’t take on any new debt.

6. How much do you have for a down payment?

The larger your down payment, the more you will convince a lender that you take homeownership seriously and won’t walk away when times get tough. Your down payment will also determine if you can qualify for a mortgage, how much money the lender will give you, and what interest rate you’ll receive.

7. How will you use this property?

Owning a home as the occupant comes with a different set of regulations, qualifying requirements, rates, terms, and risks. If you’re buying an investment property, let your lender know up front. To get you the right loan, your lender needs to know what you plan to do with the property.

8. Are you involved in a lawsuit?

A lawsuit involving a financial judgment could affect your financial position. If you’re in this boat, you’ll have to prove why the judgment won’t harm you financially.

9. What are the details of your divorce?

If you are recently divorced, your lender will want to know about it. The lender doesn’t need to know about any of the drama that led to a divorce, only how it affected you financially.

10. What is your ethnic background?

This question isn’t discriminatory. It’s in place for federal oversight, so the government can crack down on discriminatory lenders.

Updated from an earlier version by Broderick Perkins

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