Lender Versus Borrower Paid Mortgage Transactions

This ARTICLE On Lender Versus Borrower Paid Mortgage Transactions Was PUBLISHED On April 20th, 2020

Understanding Lender Versus Borrower Paid Mortgage Transactions:

  • Gustan Cho Associates will continue to bring our readers up to date on mortgage announcements throughout the COVID-19 coronavirus outbreak
  • In this blog, we will detail mortgage lender compensation as the mortgage industry is rapidly changing from this coronavirus outbreak
  • We will also touch base on how to apply for a purchase or refinance mortgage loan at Gustan Cho Associates
  • Mortgage companies are compensated in one of two ways, lender paid or borrower-paid compensation
  • These terms can be quite confusing to somebody who is not in the industry
  • We will now dive into the basics on each compensation structure

In this article, we will discuss and cover Lender Versus Borrower Paid Mortgage Transactions.

Lender Versus Borrower Paid Mortgage Transactions: Lender-Paid Transactions ExplainedLender Versus Borrower Paid Mortgage Transactions

Lender paid compensation:

  • This is the most common type of compensation for mortgage companies
  • In fact, many borrowers may not be aware of how this works because it is so common
  • Lender paid compensation incorporates the mortgage company’s compensation into the interest rate provided
  • The upfront fees are lower and the interest rate is usually higher
  • The mortgage company will be paid based on the interest rate selected
  • Please keep in mind, the Consumer Financial Protection Bureaus (CFBP) now has threshold laws in place on how much a mortgage company can be compensated (YIELD SPREAD PREMIUM)
  • When utilizing lender paid compensation, there are cases where it is possible to take a higher interest rate and receive a closing cost credit, called a lender credit
  • This is a well-used practice with higher credit score borrowers

With the market up and down due to the COVID-19 coronavirus outbreak, lender credits are less prevalent throughout the industry.

Lender Versus Borrower Paid Mortgage Transactions: Borrower Paid Explained

Borrower paid compensation:

  • This is a different type of compensation compared to lender-paid
  • This is when the borrower pays the lender compensation at closing (out of pocket or with equity in a refinance)
  • Usually in the form of discount points or an origination charge
  • This practice is common for borrowers who are looking to get the lowest rate available
  • This is also a common practice with NON-QM mortgage loans
  • Depending on your financial picture, borrower-paid compensation can save you thousands of dollars over the life of the loan
  • Paying a 30-year mortgage at a lower interest rate is usually beneficial, assuming you have the upfront funds to pay the borrower paid compensation
  • Applying for a mortgage transaction with Gustan Cho Associates is very simple
  • Whether you are trying to purchase a primary home, purchasing a second home or investment property, or refinancing your current property, the process is almost the same

You will first call Mike Gracz on 630-659-7644 or send an email to [email protected] You and Mike will have a one on one mortgage consultation to figure out your overall goals with your mortgage transaction

Home Purchase Mortgage Transactions

What do mortgage transactions look like for buying a home

For a purchase transaction, you will want to gather the following information:

  • Last 60 Days Bank Statements – to source down payment
  • Last 30 Days Pay Stubs
  • Last Two Years W2’S
  • Last Two Years Tax Returns
  • Driver’s License

Lender Versus Borrower Paid Mortgage Transactions On Refinance

If you are trying to refinance a property you already own, below is the documentation you will need to gather:

  • Driver’s License
  • Last 30 Days of Pay Stubs
  • Last Two Years Tax Returns
  • Last Two Years W2 or 1099s
  • Mortgage Statement
  • Homeowners Insurance Policy

After you have sent in the information, Mike will hook you up with a licensed loan officer in your state.

Mortgage Process

Which means reopening the US economy after the coronavirus pandemic

Once you and your loan officer have connected, you will fill out an online application link, which will allow your loan officer to verify your credit report and use the documentation you sent in to complete your pre-approval. Depending on your qualifications, your loan officer will work backwards based on your debt to income ratio combined with your credit score to see exactly what you qualify for. A refinance transaction is slightly different, but your loan officer will know what to do. Even during times of the COVID-19 coronavirus outbreak, Gustan Cho Associates are very busy. Our staff is working remotely and working extra hours to fulfill our current and future client’s needs. The real estate sector is a key pillar in the United States and the Global economy. It is important that mortgage companies continue to do all they can to keep the housing industry afloat.

Reopening The U.S. Economy After The Coronavirus Pandemic

These are tough times on many Americans and a record number of Americans have filed unemployment over the past few weeks. During the great depression, we had approximately 23% of our population unemployed. To my knowledge, the number is currently around 13% of the United States population being unemployed. That is an astronomical number to think about as unemployment was at an all-time low within the past six months. We must use this time to come together as a community. We ask that during these times of social distancing you reach out to your friends and neighbors to make sure everybody is safe. It is going to be a group effort to get our economy and lifestyle back to normal. For more information on mortgage-related questions, please call Mike Gracz on 630-659-7644.

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