How Mortgages Work

by | Dec 10, 2022 | Mortgage Facts | 0 comments

The Mortgage Pros Make Home Ownership Dreams Happen

The mortgage industry has three main roles involved in making your mortgage a reality. The one you interact with directly is your loan officer or mortgage broker.  The person your mortgage representative will primarily interact with to get you your loan is called an underwriter; this is the person who ultimately approves your loan.  Finally, the underwriter is representing the capital lender, whether that’s a bank, an investment fund, or another financial entity.  These three roles: Lender, Underwriter, and Broker, are the active parties making your mortgage a reality so you can buy a home, investment property, or any other real estate.

This blog post will give you a comprehensive look at how mortgages work. You’ll learn more about what goes on from beginning to end in the mortgage process for the mortgage professionals who make them happen so you can better understand how mortgages work.

What Does a Mortgage Broker Do

Mortgage brokers are the ones who work tirelessly to find the right mortgage for their clients, and they also handle much of the paperwork and research that goes into getting a mortgage. The average mortgage broker or loan officer has two main objectives: to try to secure the best terms they can for you, their client, and to act as an initial gatekeeper to protect the lender from bad investments.

Once Mortgage brokers are satisfied that you’re a good candidate for a mortgage based on your income and creditworthiness, they get to work on your mortgage. Most start their work process by researching the best mortgage options for their clients.  This process may be brief, especially for loan officers working with a single lender, or it can take longer, especially when a broker is working with many different lenders and has to carefully compare options and offerings.

Mortgage brokers look at details like interest rates, loan terms, and other factors to ensure they get the can get their clients the best deals possible. A good broker will use their knowledge of the market and lending options available to them to maximize your pre-approved limit and get you the best terms.

What Does an Underwriter Do?

While a mortgage broker or loan officer will make some effort to verify your creditworthiness in a general sense, underwriters are focused entirely focused on assessing how much money you can reasonably borrow and qualify or disqualify you accordingly.  It’s the job of underwriters to protect lenders, much as it’s a loan officer or broker’s job to pursue the borrower’s need for a loan.

This seems like underwriters are somewhat adversarial to borrowers and mortgage brokers, but they serve to protect the integrity of the process.  Since underwriters typically enforce the lender’s requirements for their various loan types, their job is to ensure that borrowers aren’t being lent too much money or taking on debts they can’t repay.  

If you remember the real estate crash of 2008, many of the problems that arose came from inadequate loan qualification policies and the lack of enforcement of those policies that were in place.  In many ways, underwriters protect the value of real estate investments and the stability of the financial industry as a whole.

How Does an Underwriter Assess a Borrower?

Underwriters consider several facets of the borrower, often represented as anywhere from 3 to 5 “C’s,” usually including Capital, Capacity, and Collateral, with occasional inclusions of Character and Conditions.  These core considerations are assessed individually for a borrower with different weights based on the lender’s policies and the type of loan sought.  

With this information in mind, an underwriter considers credit score and history, rent and utility payments, insurance premiums, existing debt, and a range of additional factors to assess whether the borrower can pay back the mortgage.  This process is how your mortgage or pre-approval is ultimately either approved or denied.

What Do Mortgage Lenders Do?

Mortgage lenders are the actual party providing funds for the property purchase. Lenders are almost never individuals; rather, they’re large financial institutions, like banks, with anywhere from dozens to hundreds or thousands of invested parties.  

Lenders set policies and requirements for their mortgage process, usually including home inspection and valuation above and beyond the mortgage-pre-approval process.  In some cases, some requirements may be waived at the lender’s discretion. 

Mortgage lending companies also do a lot of work to manage the backend of mortgages. This includes the filing of documents, verifying information, maintaining databases with borrower information, and other tasks that ensure the loan is in compliance with regulations and its own policies. Mortgage companies also monitor loans, either directly or with a mortgage servicing partner, throughout their life cycle to ensure they are in good standing. 

After the initial mortgage process, as long as you keep making your payments and adhere to the terms of your mortgage, you are unlikely to hear much from your mortgage lender beyond your monthly bill.  

Finding the Right Mortgage Company

At Integrity Mortgage, LLC (NMLS #1692497), we provide a range of mortgage products suited to almost any need.  Our talented team of loan officers and underwriters have experience with all kinds of real estate purchases and are eager to help you get exactly the home or investment property mortgage you need. Reach out today to learn more!


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