Lending and Processing Mortgage Loans

The Colorado mortgage lender, like most mortgage lenders, is either a bank or a financial company that lends money to borrowers who want to purchase a home. The lender also acts as both the loan provider and the servicer of the mortgage.

Both the lender and the loan servicer have specific policies and processes that they are required to follow, and both are regulated by the Federal government.

Mortgage transaction

Most people will have to interact with the Colorado mortgage lender, whether a bank or a credit union, when they apply for a mortgage. The representative of the lender will have to educate the borrower on the many types of mortgages, the interest rates, and how much to spend for the down payment.

For his part, the borrower needs to submit proof of income like pay stubs and other financial information when applying for the loan.

The lender will also have to perform his duties through credit checks, a review of the borrower’s credit history, the number of accounts open, the amount of debt and payment history.

Data check

If the borrower has some negative information on his credit report, like late payments and such, this information will impact on odds of approval and the interest rate charged by the lender.

After being approved, the lender will host the closing. This is when the paperwork is signed and the mortgage is legally put on the books.

Loan life

During the life span (time period) of the mortgage loan, the borrower will owe the lender the amount borrowed to buy the home, plus the interest of such loan.

Every monthly payment will go down to paying down the mortgage. A portion of each payment will pay out the interest owed on the loan.  The other portion of the payment is set to paying the principal or the original amount borrowed. 

Sometimes, there are instances when the lender hires another company to handle all the payment processing once the loan is booked. These are the mortgage service companies.

Mortgage servicer

This is an outside company that helps the processing of the loan, which includes making sure the loan is awarded to the borrower and that the borrower shall apply the loan to its intended purchase.

The processing also includes tracking loan payments, sending reminder notices for missed payment, and filing foreclosure documents should the loan is in default. This happens when the payments have not been paid for a length of time and unlikely to be paid.

The loan shall be in foreclosure. This is the process when the bank takes over the possession of the house and resells it to recoup any losses from the loan.

Lender and servicer

Mortgage lenders can also be the mortgage servicer. This happens if the lender is set up to handle deposits like a bank or a financing company. 

If the lender cannot hold deposits, the mortgage servicing company shall do the needed work. (Every State has it own rules on how mortgage loans are serviced and also the roles of banks and service companies.)