What Homebuyers Need to Know About Mortgage Originators
A mortgage originator is an important member of the team of financial services professionals who assist natural or legal persons in obtaining financing for the purchase of real estate. Part of the mortgage originator’s job is to advise borrowers on available loan programs and guide them in choosing the one with the most appropriate terms. Loan originators issue pre-qualification letters and also help borrowers through the application process. However, the originator does not decide whether or not to approve a loan application. You can also get help planning major home purchases by work with a financial advisor.
Mortgage Originator Basics
The job title of “originator of the loanis legally defined by federal law and basically refers to anyone who helps a borrower apply for a loan, offers specific credit terms, negotiates loan terms, or even refers a borrower to a loan source. Loan originators can be individuals, such as individual loan officers working in credit unions, or organizations, such as national banks that provide mortgage loans.
The law also defines how loan originators must be licensed. States allow individual loan originators, but national financial organizations that offer mortgages are registered with federal authorities. Loan originators working with approved organizations may not need an individual license. A loan originator license is published in the National Multistate Licensing System & Registry (NMLS).
In order to obtain a license, the lender must pass a background check, complete 20 hours of mortgage courses and pass a national mortgage licensing exam. Loan originators are also required to keep their knowledge current by attending continuing education courses each year, but requirements vary by state.
Loan Originator Fees costs for their services. These fees appear on real estate fence documents and generally amount to 0.5% to 1.5% of the total amount financed. So the loan origination fee on a $250,000 mortgage could be between $1,250 and $3,750.
The role of the loan originator
Aside from the underwriter who makes the ultimate decision whether to extend credit to a borrower and under what terms, the loan originator probably plays the biggest and most important role in the loan application process. The loan originator usually begins by discussing the borrower’s financial situation and desires and briefing the borrower on the loan programs and requirements.
Next, the loan originator gathers detailed financial information about the borrower and uses it to generate a pre-approval letter. The pre-approval letter indicates the amount of money the borrower will be likely to borrow. This helps the borrower decide which home price ranges to consider.
Once a home is selected, the borrower will submit additional details for the full loan application. At this point, a team member known as the loan processor can work more closely with the borrower, requesting documents, verifying information, and preparing the application for submission to subscription. The loan originator can also be an active participant, answering borrower questions and keeping the application process on track.
Once the request is complete, the loan originator submits it to the underwriter. The final decision on granting credit is made by the underwriter, not the originator. If the loan is approved, the originator will continue to support the borrower until closing. If the underwriter refuses to approve the request, the borrower can always work with the originator to modify the request or select a new loan program and submit a request for another amount or type of loan.
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How to Choose a Mortgage Originator
Choosing a Mortgage Originator (MLO) is a personal choice that may be influenced by your state, the status of your credit and financial history, or what kind of real estate you are buying. MLOs may specialize in one of these factors and you may need to find someone who knows how to help you with your personal situation.
The most important things to look for when looking for the right MLO are:
Before making a final decision, you should talk or meet with potential MLOs that you think might be a good fit. This will help you know who you should work with personally and who to trust with your sensitive financial information.
Mortgage originators work closely with home buyers seeking financing for a home purchase. They help educate borrowers about available loan programs, gather information for pre-approval letters, and prepare an application to submit for underwriting. Loan originators do not approve loans because that is the underwriting’s job. However, loan originators can be a borrower’s primary point of contact, answering questions and explaining the process from the start of researching financing options to closing.
Tips for getting a mortgage
A financial adviser can be a helpful guide when making important financial decisions such as taking out a mortgage. Finding a qualified financial advisor doesn’t have to be difficult. SmartAsset’s free tool connects you with up to three financial advisors who serve your area, and you can interview your advisors at no cost to decide which one is best for you. If you’re ready to find an advisor who can help you achieve your financial goals, start now.
A pre-approval letter from a loan originator is a strong indication that you will be able to borrow some money to buy a home, but it is not a guarantee. You can also get a good idea of SmartAsset’s home accessibility calculator. Enter your location, marital status, annual income, down payment, credit score, and monthly debt and the free tool will tell you how much you can probably spend to buy a home.
Mortgage rates are more volatile than they have been in a long time. Check SmartAsset Mortgage Rate Chart to get a better idea of what the market looks like right now.
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