While it’s easy to imagine that the mortgage process involves only yourself and the guy or gal behind the desk who takes your application, there are many people involved, each with his or her own duties. So, just who has their hands in your mortgage and why?
The mortgage process typically has the following participants:
The Creditor
Colloquially known as “the lender,” the creditor in a mortgage loan is technically called the mortgagee. This is the lending institution that provides the loan for the property you are purchasing.
The Debtor
A debtor is more commonly known as a borrower and technically called the mortgagor. This is the party that receives the loan, owing a debt to the creditor.
The Mortgage Broker
A mortgage broker is a person who brokers loans. That is, he or she shops a variety of lending institutions to find you the best rates and terms.
The Loan Officer
This is typically the first person you meet when applying for a mortgage loan. The loan officer takes you through the application process, counseling you on which documents to submit. She helps you fill out the application, answering any questions you may have. The loan officer acts as the lender’s contact person for yourself, your real estate agent and other participants of the mortgage process.
The Loan Processor
The loan processor is the person employed by the lending institution to ensure that all of the necessary documentation is present and to verify it for accuracy. He then packages up the documentation and application and sends it to the underwriting department. You can read a description of this process on the FHA website.
The Underwriter
The underwriter is the most important person in the mortgage loan process, for it is he or she who determines whether or not you get the loan. The underwriter’s primary duty is to determine the risk of lending you the amount requested and whether or not that risk is acceptable, according to standards set forth by the lender. To do this, the underwriter analyzes your capacity to pay for the loan – your income. He also analyzes your willingness to repay the loan, as evidenced by the payment history outlined in your credit reports. The underwriter also evaluates the collateral for the loan – the property you are purchasing – by having it appraised and determining if it is worth at least as much as the amount you want to borrow.
The Appraiser
While a licensed appraiser is typically available for hire by anyone, each lender subcontracts or employs its own appraiser. This person is responsible for determining the value of the property for which you need the loan. Generally, she uses the values of recently sold comparable properties, crunches numbers and comes up with a value for this property. Adjustments in valuation employed by the appraiser include the house’s square footage, the lot size, location, upgrades and other features.
Escrow Company
The escrow company is an independent third party to the transaction whose duties include the receipt and disbursement of funds, based on the mandates of the contract. If your agent hasn’t chosen a particular escrow agent within the company, one will be appointed and act as the contact during the transaction.
Title Company
In some states, such as Oregon, and in some regions, such as Northern California, the title company is also the escrow company. The title company is charged with the responsibility of checking the chain of title – the list of successive owners of a property – for anomalies and issuing the title insurance policy. The title insurance is the guarantee that the party selling the property is the true and legal owner, without impediments, such as liens. Depending upon region, it is the escrow officer, title company representative or an attorney who guides the transaction through the settlement process.