10 Questions for … a Mortgage Loan Officer

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Home loanSome experts believe that consumers could have prevented the subprime mortgage fiasco … if only they were better educated about how mortgage financing works.

But who wants to school themselves on ratios and amortizations and securitizations when there’s another type of homework to tackle—like picking out paint chips and light fixtures? Of course, before you can hit the Home Depot to canvas the paint aisle, you have to get the right financing.

So we talked to a veteran in the industry, Joe Parsons, a senior loan officer at PFS Funding in Dublin, Calif., to get his advice on the key things that home buyers need to know—from where to go for your loan to how you can up your chances of being approved for a mortgage.

LearnVest: What does a mortgage loan officer do?

Joe Parsons: A loan officer at a bank or a credit union is typically just the smiling face of the institution—the officer’s job is to accept an application that the borrower has filled out, and then hand it off to the underwriting department.

An independent loan originator, on the other hand, typically renders more service to the borrower, including things like advising the client about the best loans available for their purposes, gathering documentation throughout the process, ordering the appraisal and communicating directly with the underwriter to ensure that the loan gets approved.

So what happens if you don’t use a loan officer?

A large bank or credit union relies on the underwriting department to handle all of the above tasks—and these departments aren’t working as representatives for the borrower. The takeaway for the consumer: Mortgage rates available at an independent loan originator, whether it’s a broker or a small banker, won’t be higher than those offered through a big bank. In fact, in many cases, the rates are somewhat lower, partly because independent mortgage brokers typically have more loan sources available to them compared to the big banks, which usually just have a handful of loan products to offer prospective homeowners.

RELATED: How to Know if You Qualify for a Home Mortgage Loan

Why are mortgage rates constantly changing?

Virtually all mortgages are sold on the secondary market—this is the function of Fannie Mae and Freddie Mac. So once a lender has funded your loan (given you the money), they’ll sell it to the investor for cash at a small profit. That loan will then be bundled with thousands of others into a bond called a Mortgage Backed Security (MBS), which is bought and sold by investors just like other bonds and stocks. The price of these securities fluctuates daily based on market activity, so when the price of the MBS goes up, the lender will get more for the loan if they sell that day. And that means they can give you the money at a better price.
The market for MBS typically fluctuates about .25% from one day to the next. If the MBS price went up .25% (25 cents per $100 of bond value), the lenders would improve the pricing on their loans by that amount, which would show up in the form of a larger credit to the borrower for the interest rate chosen. So an improvement of .25% in the bond market would mean that a $300,000 loan would be $750 less expensive, if the borrower chose to lock in the rate at that time.

RELATED: Could Rising Mortgage Rates Hurt the Economy? 

  • Name

    I have been pre approved for a home buyer loan. The problem is when I try to contact my lender, she is unavailable and doesn’t respond to emails or voice messages. I am considering finding another lender but I don’t know if I will be penalized by the current lender for doing so. It has been over a month since I have spoken with and I need to know what my options are that this point.

    • SeaStarArts

      find another lender stat!

    • David Trotter

      You should call me at 615-866-9275. I call all my clients with updates, they don’t have to call me. And, we are direct lenders for Fannie and Freddie which means you get the best rate. And, we don’t have origination, processing, or underwriting fees. CrossCounty Mortgage..David Trotter

  • SeaStarArts

    What if you own a rental property and plan to rent out the current property/condo when you buy the house? What do lenders look for when you have that “debt” already?

    • David Trotter

      You should call me at 615-866-9275. I call all my clients with updates, they don’t have to call me. And, we are direct lenders for Fannie and Freddie which means you get the best rate. And, we don’t have origination, processing, or underwriting fees.
      It depends, the home that you plan to rent out is making your debt to income too high as it is not yet rented? We have some programs that allow for higher debt ratio’s. Call for advice or more info.
      CrossCounty Mortgage..David Trotter