Mortgage Loans - How To Save Money By Knowing More About A Mortgage Company - part 2

by Dean Shainin

Within the specifications of regulation Z on refinancing and second mortgage loans, there is a three-day waiting time after the loan closing before the money can be disbursed. This is called the borrower's "right of recision", and the borrower can change his mind and decide not to go through with the home loan deal. This is meant to give the borrower time to know the true annual percentage of the mortgage loan. In some situations, the home buyer may feel that things have been misrepresented to him. However, mortgage companies do not have such a right and they are obliged to conform to the loan agreement.

Buying a Commitment

Buying "forward commitments" on money to use for mortgage loans is what allows a mortgage company to stay in business. These commitments are purchased for a specific length of time. Sources for this money vary, and subject to the commitment, the mortgage company is obliged to fulfill the prerequisites of the lending source with respect to the movements in the interest rates. The mortgage company may be required to deliver the loans to fill the commitment at the stated yield, even if the prevailing market rate is below that yield. Another option is a commitment that may alter to the present market rate.

Originating the Loan

The process of taking the mortgage loan application from the borrower, processing all papers and documents in order to obtain, and subsequently closing the loan is what is called "originating the loan." A fee is charged by a mortgage company for this "originating," although this fee generally covers only the cost involved. The origination fee is not a big money-making aspect of the mortgage loan business. The FHA and VA set the maximum amount that can be charged for the origination fee. If the mortgage loan money is sourced from a state or county bond, the maximum origination fee will most likely be predetermined.

Knowing how the mortgage companies operate is important because it will help you know who you are dealing with, and most importantly, decide what is best for you.

Copyright (c) Dean Shainin

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