Most mortgage lenders strictly adhere to government lending guidelines. They use an underwriting category “A” for persons with squeaky clean credit. The rating applies to a borrower who has a consistent job and income history and a monthly debt ratio no higher than 38 percent of their income. The property that the borrowers want to purchase must also meet “A” standards.
What would you do if you are one of the many home buyers who does not fit this profile? Look for a lender who does not fit this profile? Look for a lender with more flexible guidelines! Of course, the lower you’re rating the higher interest you will be required to pay. In today’s tight lending requirements “B” and “C” loans are harder to obtain. Work on your financial situation, pay off old debt and credit cards and save up for a down payment. Time does cure some of the credit issues as long as you don’t have ongoing collections and you pay your current obligations on time.
Portfolio lenders or banks that do not sell their mortgages to investors can use a different approach, especially if they know you. “B” or “C” lenders will work with lower credit ratings, and even consolidate other debts into the mortgage. These loans are more expensive, but they may be worth the extra amount each month.
When you apply for a mortgage loan, you may work with a loan officer or you may choose to work with a mortgage broker. People often confuse the two job types even though both will produce the same results in the end: a new home. So you know what to expect from them during the mortgage application process, it is important to understand the difference between the two professionals.
A mortgage broker is an individual or firm that acts as an independent agent of both the borrower and the lender of a mortgage loan. He or she is the intermediary between you and the lending institution, which can be a bank, trust company, credit union, mortgage corporation, finance company or even an individual private investor. A mortgage broker will analyze your financial situation to determine which lender is the best for your loan needs. He or she will submit your mortgage application to tone or more lenders in order to sell it, and then work with the chosen lender until the loan closes. He or she receives a commission from the lender if the loan closes.
A loan officer is a representative of a lending institution, such as a bank, who works to sell and process mortgages and other loans originated by their employer. They often have a limited variety of loans types to choose from, but all originate from that specific lender. They will guide you through the selection, processing and closing of a mortgage loan and will be paid a commission or salary for their services.
A professional mortgage broker can help you shop around and find the lender and loan that suits your needs best. You may be pleasantly surprised by what you can get when looking in the right direction.
Ray Perry is the 2013 Realtor of the Year for Lake County and works for CPS Country Air Properties. He can be reached at 277-8000.
