A mortgage agreement defines the contractual terms between a lender and a borrower. After signing, the agreement gives access to the money to the borrower. Such an agreement also gives the lender the right to take possession of the mortgaged property if the borrower does not pay the loan payments. A loan fee, usually about 1% of the loan, is intended to compensate the lender for the work involved in the process. Legally, anyone who uses a mortgage broker instead of a direct lender to buy a home must enter into a fully executed mortgage brokerage contract before the broker can assess the original fees. State laws prohibit a potential buyer from paying an origination fee to mortgage brokers unless there is a written mortgage brokerage agreement between the two parties. The brokerage contract must be signed and dated by the home buyer and the mortgage broker or the director of the subsidiary when the broker works for a mortgage brokerage company. Mortgage brokerage agreements protect buyers from fraud. Lenders also rely on other information, such as the borrower`s credit report, to determine creditworthiness. Many people go directly to a particular lender to get a loan, such as Wells Fargo Home Mortgage or SunTrust Mortgage. However, other potential buyers use mortgage brokers — independent contractors who work alone or for a mortgage brokerage firm representing credit products for different lenders in order to get the best deal for their clients.
Mortgage brokers refer to many of the loans provided by large mortgage lenders. For example, Wells Fargo provided more than 20 percent of mortgages in the U.S. in the second quarter of 2013, although much of that percentage came from mortgage brokerages. Some files can be sent to a subsystem for manual approval. The credit manager then receives the assessment, asks for insurance information, plans to conclude and sends the credit file to the processor. The subcontractor may, if necessary, request additional information for the verification of the credit authorization. The interest rate on a mortgage agreement determines the interest you pay for the money borrowed. There are two main types of mortgage rates: fixed and variable.
Fixed variables do not change over the life of the loan, which provides a guarantee of how much your payments will be each month. Variable rate mortgages generally have a lower initial interest rate than fixed-rate mortgages, but vary depending on current market conditions. Mortgages list the fees borrowers pay to their lenders and agents. Mortgage fees vary considerably from lender to lender and must be taken into account when determining which mortgage offers the most advantageous terms. Typical fees in a mortgage credit agreement include loan fees, brokerage fees, acquisition fees and points. Points are a special type of fee that you pay in exchange for a reduction in the loan interest rate. The borrower completes a loan application and provides all the necessary documents. The loan officer then completes the legal documents to process the loan. The government closely regulates the mortgage industry and has passed laws to protect the rights of borrowers. For example, the Home Mortgage Disclosure Act defines the information lenders must provide and protects consumers from discriminatory lending practices.