YOUR CREDIT REPORT & CREDIT SCORE
Before applying for a home mortgage loan, obtain your credit report to ensure accuracy. Correct errors immediately or for assistance in fixing errors, consult a qualified, reputable lender who can help you get this done first. Your Credit Report and Credit Score are the keys to obtaining a mortgage and will determine the type of programs and interest rates available to you specifically.
DID YOU KNOW?
“The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months. The FCRA promotes the accuracy and privacy of information in the files of the nation’s consumer reporting companies. The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the FCRA with respect to consumer reporting companies. A credit report includes information on where you live, how you pay your bills, and whether you’ve been sued or arrested, or have filed for bankruptcy. Nationwide consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.”
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Pre-Qualified vs. Pre-Approved
Anyone can obtain a Mortgage Pre-Qualification Letter, ordered via the internet, without verification of any kind as to the financial capabilities of the recipient.
A Mortgage Pre-Approval Letter; however, requires verification of income, debts, assets and credit score for the recipient to be approved by the Lender / Underwriter for a specific loan amount and with specific terms and conditions such as down payment amount, etc.
Therefore, a mortgage Pre-Qualification has little merit; whereas a Pre-Approval Letter carries value because the homebuyer’s financial capabilities have been verified. In fact, many home sellers today will not accept an Offer to Purchase from a homebuyer without a Mortgage Pre-Approval Letter from a reputable Lender.
Types of Loans
There are many types of loans such as conventional fixed rate, adjustable rate and portfolio loans offered with various terms and conditions. Be sure to interview more than one Lender and carefully consider the many options to determine the best type of loan for your overall financial stability. Carefully read all terms and conditions to gain a clear understanding of how the loan and payments are structured.
Types of Lenders
Should you work with a Mortgage Loan Officer or Mortgage Broker? What is the difference and how will it affect you? A loan officer and a mortgage broker will explain various loan programs available, help complete your application, gather necessary documents and help process your loan to closing.
There are several differences between the two and finding the best rate, fair closing costs and a professional you can trust should be paramount to your decision.
Mortgage Loan Officer
Loan Officers represent a local bank, credit union or lending institution. A loan officer will discuss programs and guidelines offered by the specific lending institution represented. Once the preliminary application is approved, a loan officer will process the application. Local lending institutions offer a variety of programs, however, all loans “originate” from the same financial institution, which can limit the choices as compared to those offered by a broker. There is a convenience factor though: most local lending institutions will have a branch in your neighborhood where payments can be made and you can discuss your loan with the lending institution directly. You may also find that a local lender understands the specifics of property types in the area better than a lender based elsewhere.
Mortgage Broker
Mortgage Brokers represent many lenders to bring borrowers and lenders together. A mortgage broker works for a brokerage firm, not as an employee of any specific lending institution, enabling the broker to offer programs from many lenders, sometimes hundreds, to best meet the borrower’s needs. The benefit of a broker is that they often can find lenders who specialize in various market niches that other lenders might avoid, including 100% financing, no income verification, reverse mortgages, and home improvement/construction loans. A mortgage broker will notify you when there is a rate change or newly-revised programs and assist borrowers with problems qualifying for a loan or helping resolve credit issues.
Bottom Line
Once a program is selected, both the mortgage broker and loan officer help process your application and financing to closing; but after closing the mortgage broker transfers your loan file to the direct lender.
Always seek referrals from family, friends and colleagues as well as your Realtor® to be sure you work with a reliable, trustworthy and seasoned professional to guide you through mortgage financing.
I recommend homebuyers meet with several Lenders in person before making a final choice. It is important to gain a sense of trust in their work and work ethic as you will rely upon their experience and expertise throughout the home buying process.
*Call me today at 617.245.4072 for help finding a qualified, reputable mortgage consultant to interview.
