It is a very good idea to have some understanding of the inner workings or a mortgage company before you shop for a mortgage loan so you know what questions you may need to ask and why.
What are the Minimum Requirements of Mortgage Loans?
Remember that the lender/investor will set minimum requirements on the funds used for mortgage loans. The mortgage company must use these requirements.
Fannie Mae, Freddie Mac and Ginnie Mae are sources of mortgage money and are, therefore, lenders. If the mortgage company is using these sources, then their requirements apply to the company's loans. The FHA and VA insure loans, but they also set requirements on loans they insure. A mortgage company must comply if using these programs. PMI companies have requirements that must be met for them to insure a loan to the lender.
The mortgage loan company is a go-between and must meet requirements in all directions of loan sources. Federal and state laws have a certain mortgage requirements too. One such provision in the Truth in Lending Act of 1969 requires the lender to disclose to the borrower the annual percentage rate (APR), which tends to be confusing.
The percentage rate is computed by adding certain charges that the borrower has to pay back as a yield to the investor and is shown in the form of an increased interest rate. Under regulation Z on refinancing and second mortgage loans, there is a three-day waiting period after the loan closing before the money can be disbursed. This is called the borrower's �right of recision�. The borrower can change his mind and decide not to go through with the deal, but mortgage companies have no such right.
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