What
is a mortgage broker?
Why use a mortgage broker?
What are the qualifications of a mortgage broker?
What is a financing contingency?
Why do lenders need all the documentation they request?
What are conforming and non-conforming loans?
What is PMI?
What is a mortgage broker?
A mortgage broker is a person or company licensed by the California Department
of Real Estate or California Department of Corporations under the Residential
Mortgage Lending Act to negotiate with lending institutions, on behalf
of their clients, to secure real estate mortgage financing.
Why use a mortgage broker?
Unlike direct lenders, a broker works for the customer and not a financial
institution. Brokers have access to a variety of loan programs and lending
sources designed to satisfy a wide diversity of real estate lending needs.
What are the qualifications
of a mortgage broker?
California mortgage brokers are licensed by the California Department
of Real Estate (DRE) or California Department of Corporations under the
Residential Mortgage Lending Act. They must adhere to a strict code of
ethical and regulatory guidelines. The state broker associations, federal
and state laws, business and professional codes, Department of Housing
and Urban Development have established guidelines and protections for
Brokers to maintain an active license.
What is financing contingency?
A financing contingency is an agreement between a buyer and seller of
a property. The buyer agrees to buy the property subject to successfully
obtaining financing, the terms of which are usually listed on the first
page of the purchase contract. The buyer, at his option can eliminate
or waive this right at any time. If the financing contingency is waived
or removed by the buyer, prior to successful loan approval and satisfaction
of all lending conditions, the sale must be consummated regardless of
the outcome of the financing, within the contract deadlines.
Why do lenders need all
the documentation they request?
The determination of a borrower's ability to repay a mortgage debt is
focused in 3 areas.
Credit: An ability to establish long term debt and make
payments on time.
Collateral: The condition of the property and surrounding
area.
Capacity: The ability, as related to income, to one's
debts. Guidelines for documentation are set up? The purchasers of loans
in the secondary market. They are designed to facilitate the securitizing
and sale of mortgages.
What is the difference between
recurring and non-recurring closing costs?
Recurring costs are those that are associated with the ongoing ownership
of a property such as interest, taxes, and insurance. Non-recurring expenses
are one-time costs that are incurred as a direct result of the transaction
such as points, appraisal, escrow and title fees.
What are conforming and
non-conforming loans?
A conforming loan is one that meets the criteria established by Federal
National Mortgage Association (FNMA or Fannie Mae) for its mortgage
backed
security pools. The most familiar criteria are a loan limit established
each year, currently $417,000. Non-conforming loans, or jumbo loans,
exceed
$417,000.
What is PMI?
Private Mortgage Insurance (PMI) is insurance required by lenders when
a borrower has minimum equity in the property when securing new financing.
The premiums are paid by the borrower and offer access to highly leveraged
financing. Typically a lender will require PMI when the equity in a property
is less than 20% of the value either on a purchase or refinance. The purpose
of PMI is to insure lenders against financial losses in the event of borrower
default on the loan.