Mortgages Part 1: Understanding the Lending Industry

[dropcap character=”L” color=”yellow”]Lenders are the companies that give you the money to purchase a property; they actually fund the mortgage for you at closing. In reality, they will ‘own’ (hold legal interest in) more of the property than you do. Whether the lender is a bank, financial investment brokerage or institution, or a small local company, they all represent groups of investors who pool their money to make a return from the interest you pay on the loan. Often once your mortgage is closed, it is sold on the secondary market and may become part of investment funds sold on Wall Street. Most people’s retirement funds are invested, to one degree or another, in mortgage vehicles, or mortgage-backed securities (MBS). Traditionally, mortgages represent a safe, reliable, and lucrative investment for investors.

Banks historically have been the most common source for loans. There are local and national banks, each with their own advantages and challenges. However, the lending industry has changed dramatically in the past couple of decades. Now even credit unions offer mortgages. Most commonly, there are many mortgage brokerages (such as K5 Mortgage, to name one example), and the Internet has become a prominent source to find these companies and for virtual mortgage brokers to work through. Moreover, these companies could be doing better business than banks in the lending sector, since they may be only dealing with lending. In addition, they might also have a loyal customer base, thanks to mortgage broker CRM software systems. In the future, these organizations could be leading in this business sector if they take advantage of such tailored CRM software.

A mortgage broker can broker loan products from a wide array of sources. In fact, they usually have access to anything on the market. Often the number of loan products is in the hundreds. Banks and credit unions have Loan Officers to work with you, and they often have their own portfolio of products available for numerous applications. Sometimes loan officers can broker market products just like mortgage brokers. To clarify, mortgage brokers and loan officers serve the same basic function.

You will work with a loan originator of some kind who will choose the best applicable product for your specific need. The loan originator is more than a salesperson. They are the face of the lender, the only face you will see, voice you will hear, or phone number, address, and email address you will have. They are your guide and advocate through the whole process. You will never know the underwriter and the many other people involved in your loan acquisition. The loan originator must get to know you, your situation, your goals, and all the challenges that apply to getting you the desired effect. They must also be expert in the paperwork, managing the process, and they must be competent problem-solvers.

It is imperative that you work with a local and well-recommended mortgage broker! Find out why, and learn how to find a safe mortgage broker in Part 2. Stay tuned.