When buyers start the process of looking for a home, it is beneficial to understand how mortgages work. Most home buyers will need to get a mortgage. It is also a good idea to get pre-approved for a loan before starting to look at homes. When applying for a loan, it is good to know that not all mortgage lenders are the same. You will receive various responses and opportunities depending on the lender you go with. To understand the basics of how a mortgage works and the role that overlays play, consider this information from one of the premier real estate agents in Darien IL, Chris Budz.
How a Mortgage Works
When you apply for a loan, the lender takes you application and determines what you can qualify for in terms of a home loan. There are many types of lenders out there. Banks, credit unions, and mortgage brokers are a few. The lender will use your credit score, tax returns, and income history along with several other factors to find out what type of loan you can get. After the lender discovers a loan that is good for your situation, you will get approved. For lender recommendations near Darien IL, contact Darien IL REALTOR Chris Budz.
It is common for the lender to sell the mortgage to another lender that is a larger company. This lender can group mortgages together and sell them as investments. The benefit for the lender that initially got you the loan is that it allows them the ability to get more loans. Helping buyers understand each aspect of the real estate process is crucial when serving as a Darien IL real estate agent.
An overlay is basically a rule that is imposed upon a lender that is an addition to any published standards. These rules are internal and differ depending on the type of loan and lender. The primary factor involved in determining overlays is the amount of risk that the lender can handle given the current status of the market. When the economy is not going well, there will be more overlays because the risk is greater. The opposite is true in a more prosperous economy. Therefore, it is in the best interest of the lender to make sure that the loans he or she gives are paid back. If a lender gives several loans that go into default, they might be prevented from giving out loans in the future. This is why it is important to make sure that you are financially ready to buy a house before you start looking. Working as a real estate agent in Darien IL means helping to prepare buyers to work with lenders. The objective is to be realistic and give the lender confidence in your ability to pay.
For more information on preparing to buy your next home, contact Darien IL REALTOR Chris Budz.