A mortgage company is usually only the originator of a mortgage; it sells itself to various potential borrowers and seeking funds from among a number of client financial establishments who provide the funds for the mortgage. The origination of the mortgage is usually carried out by a licensed mortgage company under the guidelines imposed by the CMHC. A good mortgage company will always insist that all of the clients it serves comply with the CMHC regulations. They will be the one to prepare and maintain the relevant documentation.
The mortgage companies are very dominant in the Canadian market. They have often taken over the entire loan processing function from the banks. There are major differences between the two though. Despite this, there are some significant similarities as well. Both banks and mortgage companies must ensure that they only provide mortgage loans to those who are authorized to receive them.
The first thing that the mortgage company will do is apply for a client’s mortgage application so that it can get the best deal possible. A good tip for first time home buyers is that the best deals are often offered through the first-time home buyer programs that the government has established. Under these programs, first-time home buyers can get mortgage loans with interest rates that are much lower than the prevailing market rates. In most cases, these are fixed rate loans. However, this is only applicable to borrowers who plan to stay in their houses for at least three years.
The next thing that the mortgage company does is assess the risk that the loan applicant presents to the lender. This is usually done by collecting the necessary financial statements and other documents from the client and doing a thorough review. The main aim of this assessment is to determine whether the applicant can repay the amount as per the terms agreed upon between the two parties. However, many lenders also want to know about other assets that the client may have, such as his or her business interests, personal investments, and so on. This is because there are instances when the client fails to keep up with payments to a particular bank and this causes him or her to be unable to make good repayments to another lending institution.
After the assessment of the risks has been made, the mortgage company then looks for lenders who offer loans at attractive interest rates. This is when the offers are reviewed and modifications are either negotiated or requested. Before being approved, loan applicants need to submit their application forms along with relevant documents such as credit reports, paystubs, etc. Another thing that needs to be mentioned here is that mortgage lenders offer different rates for the different types of loan that they offer. In most cases, the interest rates on adjustable rate mortgages are a bit higher than the fixed interest rates.
The mortgage company also carries out a thorough analysis of the borrowers’ credit histories before approving or denying the application for loans. It is during the appraisal stage that the originators learn about the risk factors that each of the borrower’s assets face. If these factors are found to be favourable, the originators can then approve the loan application. However, if the factors are deemed to be not favourable, the mortgage company will then negotiate with the originators until the factors that are not favourable are outweighed by the ones that are favourable.
Sometimes the mortgage company requires the client to sign a Master Promissory Note. A Master Promissory Note is an agreement between the borrower and the bank that allows the bank to access the borrower’s personal financial information. Once the bank obtains all the information needed from the borrower, the loan originator will then calculate the monthly repayment amount. Then he or she will contact the bank and submit it to them.
As mentioned earlier, mortgage brokers work with different lenders and have a much wider network. Therefore, their clients will usually find many options available to them. These options may vary depending on the needs of the individual borrower. To find the best mortgage company, mortgage brokers will need to apply to different lenders.