Have you recently decided to purchase a home in Bloomington, Illinois? If so, first things first — congratulations. Now, unless you have enough money to pay for the house in full (the typical home value of homes in Bloomington is $180,129), you will almost certainly need the services of a mortgage company in Bloomington, Illinois. A mortgage company lets you borrow money to buy your home after they have looked over your finances and determined that you have the means to repay the money.

Understanding the Basics

A mortgage company is a private entity, bank, or credit union that loans money to people that they can use to buy a home. Some lenders work collaboratively with the Department of Housing and Urban Development (HUD), a government agency that encourages homeownership in the United States. HUD typically insures mortgages obtained by homebuyers through their lending partners. State governments run similar homeownership programs in their respective states and work with mortgage lenders as well. Government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac also collaborate with mortgage lenders. However, instead of lending money to home buyers in Bloomington, Illinois, these enterprises purchase mortgages from mortgage lenders, replenishing their cash flow and allowing them to continue lending to others.

Verifying Repayment Ability

Before issuing a mortgage, lenders in Bloomington, Illinois must also verify the home buyer’s repayment ability. The Consumer Financial Protection Bureau enacted the “ability to repay” rule in response to the 2008 housing market crash, which came into effect in 2014. This special provision is designed to prevent home buyers from taking on risky loans by requiring lenders to ensure that the home buyer has documented proof that they can comfortably fulfill their monthly financial obligations. This involves requesting proof of income, employment status, and assets. Lenders must also verify that the home buyer has good credit and that their debt-to-income ratio is less than 43%. Only after all these qualifications have been verified can the lender give out a mortgage.

Retail Lender vs. Wholesale Lender

They both serve the same purpose in the lending process and can come from the same lending institution, whether it is a bank, credit union, or private company. However, there are also some dissimilarities between the two.

Retail mortgage lenders counsel the home buyer through the loan application process. From locking in the loan terms to processing the loan to underwriting (the process of verifying that the home buyer is qualified to obtain the home loan), they do it all. They even show up at the closing. However, most importantly, they bankroll the loan, essentially putting up their own money to pay for the house now while the home buyer repays them over a set amount of time. Wholesale mortgage lenders, on the other hand, leave some of their responsibilities to mortgage brokers. While they underwrite and bankroll the loan, set the loan agreements, and show up at the closing, they push off paperwork processing and homebuyer counseling to the mortgage broker.

Are Lenders the Same as Brokers?

Mortgage lenders are often confused with mortgage brokers as they both arrange the loan. However, they are not the same. While mortgage brokers can counsel home buyers and process their home loan applications, they cannot lend them any money. They will need to find a mortgage company for that purpose.

Are You Looking for a Mortgage Company in Bloomington, Illinois?

Are you looking for an experienced and licensed mortgage company in Bloomington, Illinois? You can count on Compass Mortgage. Call us today at (877) 793-9362 or contact us online to learn more about how we can help you make wise and informed choices regarding your mortgage financing.