Mortgage lenders obviously play a huge role when it comes to real estate (though much of their work happens behind the scenes). These lending professionals have an enormous impact on everyone from home buyers to sellers and real estate agents to the housing market in general. This article will explore what mortgage lenders do beyond simply financing home loans.
Pre-Qualifying Buyers
Good real estate agents know that working with qualified buyers makes the home search process much smoother. Mortgage lenders help buyers get pre-qualified for a loan before house hunting begins. Prequalification letters make an estimation of the loan amount, interest rate, and monthly payments buyers can afford based on their financial profile. This shows sellers they are serious and ready to move forward. While prequalification isn’t a firm mortgage commitment, it does establish a budget and price range for buyers to view homes they can realistically afford.
Underwriting Loans
Once a buyer makes an offer and goes under contract, the detailed loan underwriting process begins. Mortgage lenders closely analyze the prospective borrower’s credit, income, assets, and debts to determine eligibility and risk. Underwriters issue approval letters when buyers meet automated underwriting guidelines or manual review. The experts at Colorado-based Mortgage Maestro say that obtaining this formal mortgage commitment is key for locking in financing and securing the home. If issues arise during underwriting that jeopardize home loan approval, lenders work with buyers to resolve them where possible.
Managing Appraisals
Lenders need an independent appraisal of the property to confirm the purchase price is in line with fair market value. They hire a professional appraiser to inspect the home and complete a thorough valuation. Nevertheless, appraised values sometimes fall below the negotiated price, which puts deals at risk if a buyer cannot make up the difference. Savvy lenders build contingencies for low appraisals into their pre-approvals to address gaps if needed. Maintaining strong appraiser relationships helps limit unwelcome surprises during this important step.
Advising on Credit
Mortgage lenders pull credit reports early in the prequalification process to calculate debt-to-income ratios. They advise buyers on steps to improve scores before applying for a mortgage. Simple recommendations like paying down balances, avoiding new inquiries, and correcting errors can bump up credit scores to earn better loan terms. Lenders want buyers qualified so they carefully guide them on best practices to manage credit leading up to closing.
Communicating with Agents
Successful real estate transactions require constant collaboration between agents and lenders. They share updates on pending sales and underwriting timelines to keep deals progressing steadily. Experienced lenders know delays jeopardize sales, so they prioritize fast turnaround. Proactive lenders contact listing agents in advance to share buyers’ pre-approvals, demonstrating they are serious purchasers. Maintaining positive working relationships between lenders and agents keeps deals moving smoothly all the way to closing.
Closing Loans Quickly
Once final underwriting and approval requirements are met, lenders shift focus to streamlining the closing process. Their home loan documentation and funding departments get buyers to the finish line quickly and efficiently. Time is of the essence, as extended closings risk the buyer walking away and earnest money being forfeited. Lenders aim to close and fund mortgages as soon as possible once green-lit, so sellers receive their proceeds. On-time closings delight buyers, sellers, and agents alike.
Conclusion
Though their work goes on largely behind the curtain, mortgage lenders are instrumental in orchestrating successful real estate deals. They ensure buyers get home loans they can afford, sellers receive fair prices, appraisals value homes accurately, and closings happen on time. The best lenders work seamlessly with agents each step of the process. When lenders perform well, the entire real estate production hums smoothly from start to finish.
