According to some experts, the crisis in the mortgage industry a few years back could have been prevented if only the average consumer was more educated about how the mortgage financing world works. However, not everyone wants to learn about the specifics, especially considering the numbers involved and the ratios that one often has to calculate. Still, knowing the basics will not hurt, and might actually help in the long terms for the prospective home owner.
Perhaps the first step for those looking for financing for commercial or residential properties is to understand what the job of a loan officer is. Most of the time, the loan officers people see at bank desks are just people charged with the responsibility of accepting the forms filled in by the customer. They are just the smiling face of the institution, with majority of the work done behind the scenes by an underwriting officer. Away from the bank setting, though, another loan officer might be helpful, the independent loan originator. Here, one deals directly with the individual who will be handling the loan requests. This gives the borrower the opportunity to access more services, including advice about the best loans available, documentation, appraisal and direct communication with the underwriter.
Another basic thing one should understand is how mortgage rates are always rising and falling. Basically, every mortgage is sold on the secondary market, which means that once the loan is serviced, it is then sold to another investor for cash. All the sold loans are then bundled together into a bond, which is then bought and sold by various investors just like any other bond on the market. The prices here rise and fall with demand and supply forces, and this then translates to the mortgage rates rising and falling.
Those who do not use loan officers have several advantages when they go to the underwriting officer. Large credit unions or banks normally have underwriting departments that handle all the loan related tasks. These departments normally do not work as representatives of the borrower, but that of the organization. When using an independent loan originator, the contact person is the individual involved with everything, and this gives a better chance of quality service. Still, it is important to note that mortgage rates at independent loan originators will not be higher than those that are offered at banks or credit unions. In fact, in most cases one will find that the rates are actually lower. This is because they typically have more sources of loans available to them than the big banks, all with a relatively small amount of products that they can offer to the consumer.
It pays to do one’s homework before making any investment decision, let alone in the real estate industry. It could just be the difference between making and losing a few thousands on the market.