Mortgage lenders have an important role in providing loans. But what are mortgage lenders? What do they actually do? Let’s explore the responsibilities of a mortgage lender!
If you’re searching for a 5 times salary mortgage, this guide will help you to find suitable lenders!
What is a Mortgage Lender?
A mortgage lender is simply an individual or establishment, such as a bank, that will provide loans. Specifically, these loans are for homes and real estate.
These mortgage lenders can take numerous forms, though they are most commonly found in the form of banks. However, they can also be credit unions or collections of individuals.
Many mortgage lenders will charge a fee for their services. Known as the mortgage arrangement fee, this charge is applied to cover the administrative elements of the transaction.
What Do Mortgage Lenders Do?
Mortgage lenders provide loans for real estate purposes. The main role of a mortgage lender is to determine whether the borrower fits the specific guidelines to receive this loan. Namely, they will need to determine whether the borrower can pay back the loan.
Here are the main factors that mortgage lenders will need to take into account when reviewing a borrower:
Financial Situation
Borrowers will need to have a positive financial situation. After all, they must repay the loan, meaning that they will need to have positive finances and cash flow. For instance, mortgage lenders may decline a loan application if they believe that the borrower does not earn enough money to pay off the loan.
Credit Rating
The majority of mortgage lenders will research your credit rating. This is because a healthy credit score implies that the borrower is financially responsible. There is no specific rating that you will need to achieve to get a mortgage, as every provider is different. The higher your credit score, the more likely a mortgage lender will approve it.
If you have a history of failing to pay back your credit cards by a certain date, mortgage lenders will likely question you about this.
The Loan Size
The larger the loan you want to take, the riskier it is for a mortgage lender. There is a higher risk that the money will get paid back, so this is a vital consideration for mortgage lenders.
Derogatory
In the world of mortgage lenders, a derogatory mark refers to a valid reason for these lenders to reject applications. These are negative marks that are attached to your credit report. You can receive a derogatory mark for a wide number of reasons, including late loan repayments.
Employment Situation
Generally, you will have to be employed to take out a mortgage. Namely, you will have to be in an employment situation for at least 3 months. Meanwhile, some mortgage lenders will want borrowers to have stayed in a job for a minimum of 12 months.
Different Types of Mortgage Lenders
As mentioned, there are a few different forms of mortgage lenders. Borrowers need to choose the one that’s best for them. These are the main types of mortgage lenders:
Credit Unions
Similarly to banks, credit unions provide a range of financial services, including accepting deposits. However, credit unions are typically non-profit organizations.
Banks
Banks are perhaps the most obvious and popular mortgage lenders. Just bear in mind that interest rates can be quite high when applying for a mortgage at a bank.
Non-Bank Lenders
The last form that borrowers can consider is a non-bank lender. Essentially, these are just lenders that do not fit into the other two categories. This can include online mortgage lenders.
Mortgage Broker Vs Mortgage Lender: What are the Differences?
On the face of it, mortgage brokers and lenders appear to be very similar. However, they have distinctively different roles. A mortgage broker works as an intermediary between a mortgage lender and a borrower.
These mortgage brokers will help borrowers to assess various loans so that they can find the one that’s most suitable for them.
Mortgage brokers can be extremely valuable for people who want to purchase real estate. They are particularly beneficial for people who are unfamiliar with mortgages and so can benefit from the use of an expert.
Final Thoughts
Acquiring a mortgage can be a demanding experience. Mortgage lenders play a vital role in obtaining a mortgage. So if you’re looking to purchase a home or real estate, you may have to visit one of these mortgage lenders. By choosing the right mortgage lender and understanding their role, you can make the entire situation much less stressful!
