If you want to purchase a home, you will likely need a mortgage lender to help you pay for the property. Mortgages make it possible to spread the payments out over decades, instead of having to pay for the home out of pocket. When you find that home of your dreams, your mortgage lender will be your new best friend! You’ll spend thousands of dollars on closing costs to pay for your mortgage, but what is your mortgage lender actually doing to deserve that money?

Negotiating your Mortgage Contract

First, the mortgage lender will negotiate your mortgage contract with you. This can be pretty straightforward, or it could take hours, depending on the house you want to purchase, the special requirements you have, and the type of mortgage you want. If you have a simple mortgage, the process should not take more than a few hours. If your mortgage is complex, expect the process to take longer.

You do not have to be a stickler for every little detail, but keep in mind that all points are negotiable. So, for example, if your mortgage lender will not offer a lower rate, even though you think you deserve it, consider asking him to get rid of the prepayment penalty or refinancing fees. Be a savvy consumer and negotiate a great contract rather than just take what is handed to you.

Underwriting

Some mortgage lenders take care of underwriting themselves, while others pay outside companies to handle the process. Either way, it’s something your mortgage lender does that you’ll have to pay for. Underwriting is the process by which they will determine your eligibility. The underwriter will make a recommendation as to what your interest rates margin should be, as well as how much they should allow you to spend on the property in total. Most of the underwriter’s work is looking at your credit history, but all of your finances are considered. So, your monthly income, bonus potential, assets, work history, and other factors are all monitored to determine what you’re offered.

Document Preparation

At one time, document preparation took hours, since mortgage lenders had to type out multiple copies of your contract, making sure they were all the same and perfect. Today, we have computers, printers, scanners, and copiers to make our lives easier. The lender does still have to do document preparations, though they usually use a standard contract and make changes based on your specific situation. Document preparation should take long or use many resources (like ink, paper, etc), but you’ll still have to pay for it.

Title Service

Your mortgage lender will take care of all issues regarding the title to the home. The title is a document that says who owns the property. Most of the time, it is pretty straight-forward to put the title in your name, but sometimes the mortgage lender has to straighten out problems. For example, if one of the past owners put the home up as collateral against a loan, that company could have claims to it, meaning that the title is not clear to sell to you. There could also be disputes about who owns the land, going back decades or even hundreds of years. Your mortgage lender will take care of making sure that there are no title problems or any problems that could arise are resolved.

Appraisal, Inspection, and Surveying

The asking price of a home is not always the fair market value. Your mortgage lender will have the home appraised and inspected to make sure that they are not lending you more money than the home is worth. Should you default, they want to be able to recoup their losses by reselling the house. Additionally, some mortgage lenders will hire a surveyor to clarify property lines. In some cases, your mortgage lender may not handle these things and may instead require you to show proof that you took care of it. Make sure that whatever appraiser, inspector, and surveyor you use is licensed and approved by your mortgage lender if that is the case.

Answering Your Questions

Lastly, your mortgage lender’s biggest duties are to answer your questions. Being approved for a mortgage is a big step, and many Americans don’t fully understand their mortgage contracts. This has led to major financial problems and is the route of the current high foreclosure rate – people didn’t ask questions. Even if your mortgage lender is honest and ethical, you still might be agreeing to things that aren’t wise if you sign a contract you don’t understand. Be respectful of your mortgage lender’s time, but don’t ever feel bad about asking questions. It is their job to answer them.