Mortgage News Archives

Directories
  Int'l Realty
  US Realty

Interview Potential Lenders

There are two major classifications of mortgage loans, "conforming", and "non-conforming".

A "conforming" mortgage loan is a loan where the borrower must meet strict income, credit, and resource guidelines, and the collateral property must meet appraisal, condition, and other guidelines.

Because these portfolios are composed of mortgage loans that have met stringent criteria, they are considered to be safe investments. Hence, "conforming" real estate mortgage loans command attractive interest rates for qualified borrowers.VA and FHA-guaranteed loans, as well as traditional bank mortgage loans are primary examples of "conforming" lenders.

"Non-conforming" mortgage loans are loans made to borrowers who cannot meet the strict requirements of a "conforming" loan program.

A "non-conforming" lender will tolerate a history of late payments, as long as the potential borrower has established a at least a mediocre track record of making rent or mortgage payments on time over the past year. As these loans are more risky by their very nature, their portfolios are illiquid on the open market and therefore do not command as attractive interest rate for the borrower.

Most financial institutions offer borrower "pre-qualification" at no charge.

Pre-qualification gives the borrower a degree of confidence that he can obtain suitable financing through a particular financial institution. However, as the pre-qualification process relies heavily on unverified statements of income and creditworthiness by the potential borrower, and assumes that the property to be purchased will meet certain collateral guidelines, "pre-qualification" by no means represents a commitment by the financial institution.

Be judicious with your permission to allow potential lenders to "pull" your credit reports, as each credit inquiry will be noted on your credit report.

Some lenders routinely deny applicants whose credit reports show too many inquiries, and others will expect you to account for each inquiry and prove that no credit was granted by those inquiring institutions.