Shopping For Your Home Loan: Hud'S Settlement Cost Booklet - U.s. Department Of Housing And Urban Development (Hud) Page 9
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48Loan Originator
A loan originator is a lender or a mortgage broker.
o Mortgage Brokers
Some companies, known as “mortgage brokers,” offer
to find you a mortgage lender willing to make you a loan.
A mortgage
broker may operate as an independent business and may not be operating
as your “agent” or representative.
o Lenders
A lender typically makes loans to borrowers directly. They receive
payment through fees charged to you at settlement, payment from interest
when you make your monthly mortgage payments and payments if they sell
your loan or the servicing of your loan after settlement.
Note: Whether you apply for a loan with a lender or mortgage broker, you should
receive Good Faith Estimates of settlement costs from multiple loan originators to
make certain you get the best loan product at the lowest interest rate and lowest
settlement costs.
Types of Loans and Programs
Shopping for your loan is probably the most important step in your home-
buying process.
Mortgage brokers and lenders have a wide variety of mortgage
products. The type of loan product and your interest rate will not only influence your
total settlement costs but will determine the amount of your monthly mortgage
payment.
Government Programs
You may be eligible for a loan insured by the Federal Housing Administration
(FHA), guaranteed by the Department of Veterans Affairs (VA) or offered by the Rural
Housing Service (RHS). These programs usually require a smaller down payment.
Ask your lender or mortgage broker about these programs. You should shop and
compare quotes from different loan originators because each may offer different rates
and loan terms.
If you are a first time homebuyer, ask your real estate agent/broker and loan
originator about the availability of local or state programs such as reductions in
transfer taxes, special income tax deductions or state homestead exemption
discounts.
Types of Mortgages
Two of the most common types of mortgage loans are fixed-rate mortgages
and adjustable rate mortgages.
The interest rate on a fixed-rate mortgage will
remain the same for the entire life of your loan while the interest rate on an
adjustable rate mortgage (ARM) may adjust at regular intervals and may be tied to an
economic index, such as a rate for Treasury securities. When the interest rate on an
ARM adjusts it may cause your payment to increase.
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