Let’s face it, every industry has its own set of terms that are used pretty much exclusively within that industry and the mortgage industry is no different. The word “mortgage” alone is derived from the Latin word “mortis” which loosely means “dead” and a French term “gage” which is a pledge. Put together and a mortgage is a pledge to pay the lender until the loan is no more. That sounds a bit scary perhaps but mortgage loans are not scary at all, it’s just that lenders and loan officers toss mortgage terms around on such a regular basis they forget the consumer is new to all of this.
Perhaps one of the first things to appreciate is that the borrowers are in complete control of the situation. It is the buyer that decides to buy the home, not the lender. It’s not the real estate agent that buys the home, it’s the buyer. Without the buyer nothing happens. The agent doesn’t make a commission and the lender doesn’t make a mortgage. If there is something that is confusing or the buyers feel they’re being rushed into something, the wise thing to do is to pull over and take a deep breath. Remember the power of the buyer. That also means asking questions.
The loan process is really two basic approvals—the borrowers and the property. The lender will determine if the borrowers can afford the monthly payment and are required to verify that through a third party, primarily an employer. That’s why the lender asks for pay check stubs and includes them in the loan file. The lender will also verify the borrowers have demonstrated the ability to handle their monthly obligations in a timely and responsible manner. That’s verified with a credit report and communicating with the landlord to get a rental history. The lender will also make sure there are enough funds to cover a down payment and closing costs and that’s why the lender asks for bank statements from you. With regard to the property, the lender will make sure the property is good condition and conforms to the neighborhood.
That’s really about it. There’s nothing scary about a mortgage at all. It can certainly get confusing but that’s the loan officer’s fault when handing over dozens of loan disclosures without explaining what they’re for and why they’re needed. A good loan officer will close maybe 10 or more loans per month and it’s easy for a loan officer to forget what’s really going on. Good loan officers take the time to fully explain the process and hold the borrowers’ hand at every step of the way. Sure, there are foreign terms you’ll encounter when applying for a mortgage process but if you’re not sure about what exactly is going on or something is confusing, remember you’re the boss here, not the lender or the loan officer. Mortgage loans are just like any other type of lending, it’s just lenders sometimes use too many goofy terms.
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